We often talk about the importance of saving for retirement, and how it’s a good idea to save both often and in diverse ways to make sure that you have the most options when it comes to retirement. Now, The New York Post reports that the amount of money you need to save is growing, to $1.5 million up from the previous $1 million.
Why do you need more for a comfortable retirement? You can thank the fact that Americans are living longer, interest on savings is low and that Social Security is no longer a foregone conclusion, according to Rebecca Walser, a tax lawyer and certified financial planner. She believes that $1 million also is going for less these days in terms of longevity.
“It is really bad out there — so bad, in fact, I feel like I am sitting on a mountain and screaming at America to wake up,” Walser told The Post. To hit this point, she recommends workers put aside 25% of their pre-tax income rather than the 10% that you normally hear suggested.
She explains some of her fears in her upcoming book, “Wealth Unbroken: Growing Wealth Uninterrupted by Market Crashes, Taxes, and Even Death.” These include monetary policies artificially propping up equities and other asset classes while fueling the huge surge in US federal debt, currently at over $21 trillion. Failure of the troubled Social Security system and government entitlement programs may not be far behind, she says — or a subsequent rise in taxes, she adds, to shore up government finances in desperate financial straits.
These aren’t insurmountable circumstances, though. The combination of financial prudence, sound tax advice on taxable income and $1.5 million saved, Americans can retire in a better position to draw down the standard 4 percent annually. Just don’t expect social security to help make up the difference. It has suggested for years that the current generation will not have any social security money left to take when they reach retirement age.
“The premise is correct,” said Kiernan, a portfolio manager with Highlander Capital Management in Short Hills, NJ. “Historically low-interest rates require more capital at retirement to generate the same amount of income that you’re accustomed to,” he added.