A happy retirement is more than just money (2024)

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Reports of Americans being unprepared for retirement have become so widespread that it no longer seems to elicit any emotional response.

The Employee Benefit Research Institute found that 40.6 percent of all U.S. households (where the head of the household is between ages 35 and 64) are projected to run out of money in retirement. Moreover, the average Social Security benefit provides an income equivalent to the poverty level for a family of four.

Daunting numbers indeed, but these conditions speak to priorities undertaken years earlier. Many families would list education as their No. 1 goal, and given the exorbitant cost of college tuition, it only makes sense that their nest egg is less than robust.

This is an important distinction to make, that insufficient retirement savings could be more a function of conscious decisions made in the past than a failure to behave responsibly.

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Furthermore, saving for retirement is not as easy as advertised.

Glossy financial planning brochures with couples in their mid-50s riding a sailboat notwithstanding, this is simply an unrealistic expectation for many households. Given our increasing life expectancy, accumulating enough money in 35 to 40 years of working to sustain us for the remainder of our lives is no easy task.

To put this into perspective, if you take out 5 percent from a diversified portfolio each year, you stand a 58 percent chance of running out of money within 30 years of retirement.

After all, anyone taking withdrawals during the 2008 housing crisis would have a dramatically different outcome than investors who retired in 2009 and lived off market returns in the beginning of retirement. Volatility matters. This would suggest that you need $2,000,000 saved to generate $100,000 in annual income.

It's also worth mentioning that distributions from retirement accounts are subject to ordinary income taxes. In other words, there's a fair chance that a great many savers — unless they make lifestyle sacrifices or wiser investment decisions or have an actual pension — won't be able to maintain their current quality of life once they leave the workforce.

However, for many retirees, saving enough for those golden years is only part of the formula for a good retirement.

The key to achieving an active, satisfying and happy retirement involves more than having adequate savings. It also entails interesting leisure activities, creative pursuits and mental and physical well-being.

Fortunately, there are a number of viable solutions that might address any financial shortfall, including working part-time at something related to your profession. A teacher, for example, might begin a tutoring service and accumulate innovative metrics that validates his or her approach. A scientist may decide to teach an online class at a community college two days a week.

A happy retirement is more than just money (2)

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In lieu of brick-and-mortar offices, entire new job niches are being created online with Twitter handles and YouTube channels, so it pays to get creative. Many of us have hobbies or passions during our working careers that can provide both supplemental income and access to a social network of likeminded people.

Success in retirement can be defined as waking up in the morning and going to sleep at night and doing exactly what you want in between.

Ivory Johnson

founder of Delancey Wealth Management

If you enjoy gardening, consider working part-time at a nursery a few years before leaving your job. Those who prefer bike riding can create a personal training regiment, teach novices about biking and lead groups through trails for a fee.

During the planning phase, you have time to complete any license requirements and build relationships with business owners and centers of influence. Some of us may even consider moving to a state with a lower cost of living. Perhaps renting out and depreciating your residence in a high-cost state subsidizes the mortgage in one with lower income taxes; sometimes it just takes a little imagination.

If meeting new friends in retirement or after relocation is uncomfortable for you, plan a vacation or getaway with three or four other couples who find themselves in a similar financial predicament: reasonable Social Security benefits, a little home equity and not enough savings.

Success in retirement can be defined as waking up in the morning and going to sleep at night and doing exactly what you want in between.

Write down exactly what you want your life to look like during retirement, and develop a plan to make it happen. You might be surprised to learn that retirement planning has more to do with "what you'll be doing" than "how much you'll have to do it with."

A happy retirement is more than just money (2024)

FAQs

A happy retirement is more than just money? ›

The key to achieving an active, satisfying and happy retirement involves more than having adequate savings. It also entails interesting leisure activities, creative pursuits and mental and physical well-being.

What is the 3 rule in retirement? ›

A 3 percent withdrawal rate works better with larger portfolios. For instance, using the above numbers, a 3 percent rule would mean withdrawing just $22,500 per year. In this case, you may need additional income, such as Social Security, to supplement your retirement.

Are people happier after they retire? ›

About 67% of retirees who are 15 years or less into retirement said they're happier since retiring, and 82% said they're more relaxed on a typical day. While only 8% report feeling less happy in retirement, about a third said they're not more happy than they were before leaving the workforce.

How much money do you need to retire with $40,000 a year income? ›

According to the rule, you make a 4% withdrawal from your accounts in the first year and adjust your withdrawal rate for inflation over the following years. Let's say you plan on living on $40,000 a year during retirement. According to the 4% rule, you'd need $1,000,000 to retire, or 25 times your annual expenses.

What is the $1000 a month rule for retirement? ›

According to the $1,000 per month rule, retirees can receive $1,000 per month if they withdraw 5% annually for every $240,000 they have set aside. For example, if you aim to take out $2,000 per month, you'll need to set aside $480,000. For $3,000 per month, you would need to save $720,000, and so on.

How long will $500,000 last in retirement? ›

Summary. If you withdraw $20,000 from the age of 60, $500k will last for over 30 years. Retirement plans, annuities and Social Security benefits should all be considered when planning your future finances. You can retire at 50 with $500k, but it will take a lot of planning and some savvy decision-making.

What is a catchy phrase for retirement? ›

I'm retired, Goodbye Tension, Hello Pension! The legend has retired And so the adventure begins I'm retired, do it yourself Yes! Retired & Loving it! Retired, now the fun begins!

What does Dr. Seuss say about retirement? ›

Don't cry because it's over – smile because it happened.” ~ Dr. Seuss. “Retirement is a blank sheet of paper.

What does the Bible say about retirement? ›

The only mention of retirement in the Bible is for the Levites who were instructed to withdraw from service in the tent of meeting. This passage includes instruction for the Levites in both service and retirement from their duties, and it captures the essence of instruction to retired Christians.

What is the hardest part of retiring? ›

Retirees grapple with longevity, market fluctuations, inflation, taxes, and legacy desires, all affecting retirement savings adequacy. Manage retirement income with the 4% rule, variable annuities for assured income, and long-term care insurance for potential healthcare costs.

What do retirees miss the most? ›

Missing Work

Some people miss the routine. Others miss colleagues. And, many people genuinely enjoyed their work more than the relative retirement boredom.

Which retirees are the happiest? ›

According to our research, retirees who live “near or close” to at least half their children are five times more likely to be happy.

What is a good monthly retirement income? ›

Average Monthly Retirement Income

According to data from the BLS, average 2022 incomes after taxes were as follows for older households: 65-74 years: $63,187 per year or $5,266 per month. 75 and older: $47,928 per year or $3,994 per month.

What is the average 401k balance for a 65 year old? ›

Average and median 401(k) balances by age
Age rangeAverage balanceMedian balance
35-44$91,281$35,537
45-54$168,646$60,763
55-64$244,750$87,571
65+$272,588$88,488
2 more rows
Jun 24, 2024

How many people have $1,000,000 in retirement savings? ›

You're not alone if your retirement account balances are far from the $1 million mark. While many people may aim for that goal, most don't reach it. Employee Benefit Research Institute (EBRI) data estimates that just 3.2% of Americans have $1 million or more in their retirement accounts.

At what age is 401k withdrawal tax free? ›

As a general rule, if you withdraw funds before age 59 ½, you'll trigger an IRS tax penalty of 10%. The good news is that there's a way to take your distributions a few years early without incurring this penalty. This is known as the rule of 55.

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