SavvyPoll Number Four

I love the annual Retirement Confidence Survey (RCS) from the Employee Benefit Research Institute (EBRI) and Greenwald & Associates. In fact, I referenced the 2013 survey quite extensively in my book to help paint a picture of the retirement landscape. This annual survey is an excellent source for getting an overview of how Americans are preparing for retirement and their confidence level.

The survey takes a look at who is saving, how much they are saving, if they have attempted to calculate how much money they need to save for retirement, and the impact of work place savings plans.

A nice positive from this year’s survey? Fact Sheet #6 – Preparing for Retirement in America notes that worker’s confidence in having enough money to live comfortably throughout retirement increased in 2014, after having been on a downward trend for several years.

Unfortunately, there are a significant number of negatives. One such negative was that less than half of workers, 44%, report they and/or their spouse have ever tried to calculate how much money they will need to have saved so that they can live comfortably in retirement.

Not surprisingly, workers who have done a retirement savings needs calculation, compared with those who have not, tend to have higher levels of savings. I assume most SavvyReaders have calculated how much they will need in retirement. I know I have.

This week’s SavvyPoll asks, “What is your retirement nest-egg goal?”

A. $100,000 – $500,000

B. $500,001  – $750,000

C. $750,001 – $1,000,000

D. More than $1,000,000

I was interested to see that all responses were either ‘C’ or ‘D’ which means readers have calculated that they will have (or require) a retirement nest-egg that exceeds $750,000. Interesting because while I am reluctant to say that someone is wrong for choosing less, I would question how they arrived at the conclusion that $400,000 – as one example – will be enough to sustain them for possibly 25 years or more, particularly if we are talking about a married couple. After all, when you consider drawing down a nest-egg such as the $400,000 example, using the 4% rule, that is only $16,000 annually.

Also, as I touched on in my response to Char B, I’m curious to know if most people are thinking about the impact of inflation when developing retirement plans. As an example, assume a couple is planning to retire in their mid-60s, ~ 30 years from now, and they are projecting a $2M nest-egg. If we assign a rate of 1.5% inflation annually, the value of $2M after 30 years is reduced to $1,279,524.86. If they want the value of $2,000,000 today – in 30 years – they will need $3,126,160.44. Along with taxes, the impact of inflation is something to think about if you haven’t.

With all that said, the results…

SavvyPoll Number Four

Blogger-in-Chief here at RetirementSavvy and author of Sin City Greed, Cream City Hustle and RENDEZVOUS WITH RETIREMENT: A Guide to Getting Fiscally Fit.

22 Comments

  1. A Twitter reader responds…

    “Emphatically, ‘D.’ 1) I’m young and already investing, 2) I learn from my clients, 3) I read for personal development.”

  2. D.

    • Thanks for stopping by, Paul. Your answer is noted.

  3. We are a solid B pushing for C

    • Sounds good, Brad. I’ll put you down for ‘C.’ Check back Wednesday for results.

  4. I definitely have to go with D. My husband, Mr. Super Investor (thank God for him), has us currently in the $2M range. However, if things change for the better, we could possibly hit $3.

  5. D. Why such low levels to choose from? I am interested to see what people say in the following ranges.
    1,000,000 – 1,199,000
    1,200,000 – 1,399,000
    1,400,000 – 1,599,000
    1,600,000 – 1,799,000
    1,800,000 – 2,000,000
    More than that, well those people are not reading PF blogs! 😉

    • Your answer is noted, my friend. I thought about higher ranges. However, based on surveys and reports I’ve read with respect to savings/investing rates of most households, particularly American households, I think it is safe to say the vast majority of people are not only not thinking of nest-eggs in excess of $1M, they are not on track to reach that level.

      My guess is that most people reading this blog, and other PF blogs for that matter, are looking at a nest-egg of something in the $300K – $1M range. We’ll see. I will be surprised if the ‘More than $1M’ response comes out on top.

      • Hmmmm… well in that case let me rethink. I was including personal home value when I said D. If we are talking investments and cash only then put me down for C.

        • Yep. Perhaps I could have been more clear in what I was asking. I am not really a fan of the traditional definition of net-worth, discussed here. For me, nest-egg is basically synonymous with portfolio value. When it comes to evaluating preparedness for retirement and management of a retirement plan, I believe it is much more useful to look at passive and portfolio income.

          • As I expected, most results over D.

            Maybe you could do a future poll with the ranges I suggested and specifically request that principal residence not be included in the calculation, nor vehicles (depreciable assets), only additional properties, cash and investments. That would be cool.

            I like your polls, James. Will continue to promote them to get more responses.

            • Thanks for the feedback, Deb. It is great to see that the respondents generally share the view that I have, which is that a retirement nest-egg needs to be quite substantial. That is especially true since most people will not have multiple sources of income from passive sources (e.g. pensions) and will be heavily dependent on the investment portfolio they have put together.

              The first few polls have been pretty well received. As I have noted previously, I’m just trying to find a way to engage readers that a desire to learn more about personal finance and how to establish – and manage – a retirement portfolio.

    • More than that. And yes I am. 🙂

      • Keep on reaching for a nest-egg beyond $2M and keep on reading this blog, my friend. Check back Wednesday for the results.

  6. Add me to group A.

    • Done, my friend.

      • I’m so use to thinking in terms of one, I’ll be a plus one before the end of the year. Change “us” to C. $850k is the goal, given your note concerning inflation [which was not considered] some recalculating will need to be done.

        • Changed. The two biggest killers to retirement portfolios are taxes and inflation. Often, people are cognizant of taxes and understand the different tax implications between accounts such as a 401(k) or Traditional IRA (tax-deferred) and a Roth IRA (tax-exempt). Unfortunately, people often neglect to think about the value of their future money because of inflation.

          You can always find an inflation calculator online. However, I have included one on the updated RWR Planner, which I may have already sent. If you already have it, great. Disregard the email I just sent.

  7. D!! (As a married couple). We’re trying for 2 mil…we’ll see what happens since were just starting out as of 2 years ago and in our mid 30’s. But we are already at a decent pace I think…

    • Your answer is noted, Char. Like you, our goal is ~ $2M; $1.97M specifically. We’re on pace for about $2.2M so it is looking good right now.

      Check back Wednesday for the results.

    • One of the things that crossed my mind after reading your comment, along with some of the others, particularly those like yourself that have 25+ years until retirement was, “I wonder if they are calculating inflation into the nest-egg they are building toward?” As an example, assume you are planning to retire in your mid-60s, ~ 30 years, and you are planning on a $2M nest-egg. If we assign a rate of 1.5% inflation annually, the value of $2M after 30 years is reduced to $1,279,524.86. If you want the value of $2,000,000 today – in 30 years – you will need $3,126,160.44. Something to think about if you haven’t.

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