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Friday, January 26, 2018

Money Translated Into Retirement Years

By Linda Lovely

This month’s topic revolves around what you might do if you were a millionaire. But, is that really wealthy these days?

Maybe not if you’re either looking to retire or have recently retired. If you fit in one of these groups and have actually managed to amass a net worth of $1 million (excluding your home), the answer could be you should either keep saving or at least stay on budget.

Why? In South Carolina, where I live, one study predicts a million dollars will last an average retiree 22 years and two months. If you retire at age 63, that would get you to age 85 before you need to move in with relatives. Twenty-two years also is approximately the average amount of time a 63-year-old woman is expected to live. So you might squeak by with a million. Unless you live in a higher-priced locale, like Hawaii where a million is expected to last only 13 years and one month. Or you have good genes and expect to beat the life expectancy averages. 

Then there’s an estimate by Fidelity Investments that a retired couple is likely to spend about $250,000 just on health care during their golden years. 

Of course, these financial equations don’t take individual situations into account, like pension income, low-cost lifestyles, and paid-off mortgages. In other words, you need to do your own financial homework. 

But let’s go back to the starting point. How much money would you need to consider yourself truly wealthy? One survey of 432 “millionaire” retirees found that 70 percent didn’t feel wealthy and about half felt they’d need at least $5 million to have true wealth. 

Here are a few more interesting statistics from recent studies: 
There were 10.8 million U.S. millionaires in 2016,
The upper middle class accounts for about 29.4% of US population ($100,000-$350,000 income for a three-person family) 

I also listened to a recent NPR radio show that discussed the relationship of money to happiness. One of the experts studying this conundrum concluded that money could buy happiness if you spent it wisely. And topping his list of wise happy money decisions was spending money on others. 

That leaves some hard decisions. How much money should we save to reduce the chances of being a burden on our relatives? And how much money can we afford to devote to causes or activities that bring us joy?

Have you solved the equation?


Annie said...

Good points all and so many hard working people can't even manage to save. Illness, age and the unexpected happens. Personally while I agree it's important to put away for the future, I think it's even more important to live each day like it's your last, to do this things you love, eat that cake, take that trip, hug those you love...

Linda Lovely said...

Finding the right balance is important. Decades back I had a friend who had no children or heirs. Her goal was to live to the hilt and die in debt. I know she died a few years ago. I don't know if she accomplished her goal.

Judith Ashley said...

Interesting post Linda. I am relatively retired and am relatively at peace with my lifestyle. I'm fortunate that I own my home so I don't have a mortgage but I do have Insurance and property taxes. Happiness is, I believe, something I'm in control of. There are many ways to give to others that are not expensive or even cost anything at all so if I want to have that balance, it isn't dependent on my financial well-being.

My brother had the attitude of the friend you referenced. He did die in debt and it was not fun for me, the executor of his estate, who knew he could have paid off the debt had he chose to. He didn't, instead in his final years he spent a lot of money on friends and turned a blind eye on those who stole from him.

Barbara Rae Robinson said...

Interesting, Linda. As I watch my two kids discussing upcoming retirement, their plans include travel. Something our budget doesn't allow for. Not everyone has an equal chance to save up for retirement. We have some IRA money, and it seems to be keeping up with the market and our withdrawals. But that could end someday. So we are doing a reverse mortgage to give us some extra funds to live on and to upgrade our house. Money is definitely on our minds these days.

Maggie Lynch said...

Interesting about money buying happiness. I don't think so at all. I've had times in my life when my income was in that top percentile, and other times where I was close to homelessness. In college I was actually homeless for a year when I lived in a tent in order to continue school after a costly medical condition and surgery.

I do think that money can buy creature comforts and, for some, it buys peace of mind that they will always have a roof over their head. The problem is it is never guaranteed. Retirement savings can disappear due to a prolonged layoff, a recession, an illness, or any number of life changes. According to the National Endowment for Financial Education, 70 percent of people who win a lottery or get a big windfall actually end up broke in a few years.

I'm a big believer in the Buddhist precept of life is suffering. Contrary to what some people think, this is not a belief that we have no hope of ever being happy. Instead, it is meant to say that because we always want something more--never happy with the moment--that we are doomed to suffer. I think there is a balance with money that takes a recognition of the reality of need versus letting the pursuit of money rule your every decision. I can't say I have the secret to that balance, but I know a part of it is definitely being happy in the moment for things I do have instead of being in constant pursuit of things I don't.

Sarah Raplee said...

Wow, Maggie! Why am I not surprised you made it through college living for a year in a tent? Respect!

Perhaps the reason mindfulness is good for us is that it helps us find joy in the present moment, no matter what. Money can't buy that.

Linda Lovely said...

I'm delighted this post sparked such interesting comments. I'm afraid I didn't do a very good job of explaining the NPR examination of money and its relationship to happiness. It wasn't how much money an individual had, but how they used the funds they did have. They did experiments in Uganda, a poorer country, as well as in Canada. In these experiments, they asked the participants how happy they were at the start of the day on a scale of 1-10. Then they gave them money and told them to (1) spend it on themselves, or (2) spend it on others. At the end of the day, they asked the people to again rate their happiness. The ratings of those who spent it on themselves didn't tend to change. But those who spent it on others tended to be happier. But I agree that giving to others doesn't have to be in the form of money. There are lots of opportunities to volunteer to help others.

Judith Ashley said...

This past Christmas I assisted a friend who wanted to make some charitable donations. I had the joy of writing out checks for $2000.00 for six small non-profits. The kind that barely survive but do really good work! Talking about those charities, writing those checks and mailing them or handing them to the people in person were the High Points of my holidays. As he has received the heartfelt thanks from the recipients, he chokes up. In the past he gave to the big charities and not that they don't deserve or need funds but the letters of "thank you" he received are the exact same (except for his name) as the person before and after him on the computer's list. Some of the recipients have even traveled to see him and thank him in person. Still get a good feeling just thinking about it.

I also agree with Maggie's point about being happy with what we have and where we are in life. That does not mean we don't work to change things (like write more books) but we are not unhappy with what we've done.