Will You Be Able to Retire?

Too few Americans have enough money saved for their retirement. Nearly two-thirds of all Americans have $1,000 or cash and investments in total. Those people will either have to work their entire lives to make ends meet or they’ll have to subsist on whatever Social Security provides them with. How about you?

Is $3 Million Enough to Retire On?

If you had $3 million could you retire early? Our friends at Retire By 40 referenced an article by the Canada’s Financial Post which referenced a couple in their early-to-mid 50s suggesting that this couple residing in Canada’s beautiful Pacific Northwest province of British Columbia might have a tough time retiring on $4 million CAD, that’s about $3.1 million in USD.

For many of us, it’s laughable to think that we couldn’t make $3.1 million last us a lifetime, but it’s tied to lifestyle. The amount of money that you have can determine your spending habits. Many people live to their paycheck; they spend everything they have. So even a couple with over $3 million saved up in stocks, bonds, mutual funds, their primary residence, and an empty parcel of investment land might not provide enough cushion to rely on for possibly four or five decades.

This British Columbia couple might not have a choice; they might just need to make due on $3.1 million. That’s because the husband lost his nearly $300,000 executive position. If he can’t find new work, they will have to live on what they have. Many people have expenses that are arguably nonessential. In this couple’s case. they clearly have expensive tastes. Every month, they are spending $3,325 on wine, restaurants, clothing and grooming, travel and their golf club. If you lacked a steady income, and you have to dip into your savings to fund this lifestyle, you might not be able to spend like this. You’re money can only go so far.

Do You Have Enough to Live On?

A reasonable estimate to determine if you have enough to live on is to multiply what you spend each year by 25. If you spend $50,000 a year, you would probably need $1.25 million to be able to continue your lifestyle. Our British Columbia couple is probably spending $14,000 a month, that’s $168,000 each year. If you multiply that by 25 you get $4.2 million. If their net worth is $3.1 million, it looks like they fall short by about $1 million. Making their problem worse is that about half their money is tied up in real estate, assets which you can’t liquidate as easily as you could with stocks, etc.

Do You Have Enough to Live On? Amassing wealth is one thing, being able to continue to live on what you have might be quite another. A couple with expensive tastes, wine, golf club memberships, expensive restaurants, might need to tighten their belts, even though they have more than $3 million.

How Wealthy are You?

The British Columbia couple clearly has a lot of money relative to the overall population. Do you know where you stand? Our friend, Mike Sandrik of MikeSandrik.com, introduced us to the Wealthometer. You simply enter a few bits of information and you can quickly see where you stack up against your fellow Americans. Before you get started entering all of your personal data, they ask you to guess where you are on the Wealthometer; what percent of the people are worth more than you, how many are worth less. Then they want your data. They want to know your your real estate assets, your liquid assets (stocks, bonds, etc.), how much debt you have — that includes your mortgage balance on your home, and finally how many people live in your household. That’s it. Four bits of data and you can see how you stack up. Give it a try.

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