What Kind of Retirement Can $1 Million Get You?

Source: Thinkstock

Source: Thinkstock

Unless you plan on working until death, as 40% of baby boomers say they do, retirement planning is absolutely essential. According to data gathered by Money News, 87% of adults say they are not confident they have enough money for retirement. This leaves the remaining 13%, who feel completely confident about their retirement savings.

How much is enough to feel confident? Is $1 million enough? According to a 2014 report by USA Today columnist Rodney Brooks, it may very well not be. Here’s why.

Average retirement age

In the U.S., the average age at which a worker retires is 62 years, according to a Gallup publication. Assuming a life expectancy of 81 years, this means you have almost 20 years of expenses to cover with your retirement income.

Joe Heider, regional managing principal for Rehmann Financial Group in Westlake, Ohio, said to USA Today in early 2014, “It translates into $40,000 to $50,000 (annually) in sustainable revenue.” He adds that 10 or 12 years ago, when interest rates were much higher, it could translate into much more in annual revenue, but not in today’s market.

A household that’s used to living on a higher income may be in for a rude awakening when they have to reduce their standard of living dramatically to stay on track.