Have I Saved Enough to Retire?

By Chris Duderstadt

March 25, 2024

Have I Saved Enough to Retire?

Key Points – Have I Saved Enough to Retire?

  • How We Help People Answer the Question: Have I Saved Enough to Retire?
  • Stress Testing Your Financial Plan
  • Other Critical Questions That You Need to Ask Yourself During the Retirement Planning Process
  • Achieving Financial Independence
  • 9 Minutes to Read

Have I Saved Enough to Retire?

Does it seem like you’ve worked your whole life and retirement can’t come soon enough? If that’s the case, there’s probably a question that’s constantly on your mind. Have I saved enough to retire?

To answer that age-old question for people, our team builds a forward-looking financial plan that shows them the probability of success of if they’ve saved enough to get to and through retirement. That financial plan is stress tested through various historic economic cycles to make sure that you’ve saved enough to retire even in the worst economic conditions.

If events like the Dot-Com Bubble or Great Recession take place while you’re in retirement and no longer have a paycheck to fall back, do you know if you’ve saved enough to retire? We’ll build you a personalized financial plan that’s based upon your goals, risk tolerance, and other key factors.

Other Questions to Consider While Determining If You Have Save Enough to Retire

Have I saved enough to retire is the question that everyone wants to know the answer to while planning for retirement. But there are several other questions that you need to be thinking about during that process. For starters, ask yourself these questions:

Notice that these questions don’t even dive into things like taxes, risk management, estate planning, and investment management. Those are the pillars of financial planning, and each of them have their own long list of retirement planning questions and considerations.

We’ll get into some of those more nuanced questions and considerations later in the article, but first, we’d be remiss if we didn’t mention our Retirement Plan Checklist as a retirement planning resource. In it, you’ll find a 30 yes-or-no questions that gauge your retirement readiness. It also includes age-and date-based timelines littered with important items to contemplate as you’re continuing to think about, Have I saved enough to retire? Download your copy below.

Have I Saved Enough to Retire

Retirement Plan Checklist

What Are Your Goals for Retirement?

Have I saved enough to retire is probably the most frequently asked question that our advisors here when meeting people for the first time. But there’s another question that isn’t too far behind. It’s “What should I invest my money in?

Believe it or not, investments aren’t the focal point of the conversation when our team meets with prospective and new clients. Before we can discuss investment options that could work well for you, we need to know what your goals are and how you think and feel about money.

Do you want to spend more time with family? Do you want to travel all over the world in retirement? Or maybe you want to do a lot of volunteer work, prioritize charitable giving, or figure out how to effectively build generational? Those tend to be some of the most important things to people as they’re entering retirement. What do you want your retirement lifestyle to look like? You need to figure that out and determine your retirement goals before you can know if you’ve saved enough to retire.

When Do I Plan to Retire?

Did you know that more than 4 million Americans are projected to turn 65 in 2024 according to the Alliance for Lifetime Income Retirement Income Institute?1 As the masses of Baby Boomers retire, many of them are asking, “Have I saved enough to retire?” There is usually a long list of underlying factors that are rooted within that question too, including the following:

Many people choose to wait to retire until 65 to retire since that’s when you become eligible for Medicare. But if you have saved enough to get to and through retirement and you’re younger than 65, what’s stopping you from retiring? It is very difficult to have the clarity that you’ve saved enough to retire without a personalized financial plan.

Hopefully, you don’t dread going to work every day and enjoy your job to some degree. Even if that is the case and retirement isn’t top of mind, you still need to have a financial plan in place. That way you’ll still know whether you’ve saved enough to retire in case you no longer want to work. At Modern Wealth Management, this is what we refer to as being financially independent. That’s when you’re doing the things you want to do every day for the reasons you want to do them and not because you need a paycheck. And if you want to keep working, it’s because you’re choosing to do so.

What Are Your Anticipated Expenses in Retirement?

As you transition into retirement, many of your day-to-day expenses might not change that much at first. You may or may not still have a mortgage or car payment. And you’ll still be paying for the goods you get at the grocery store. But if you want to take more vacations in retirement, buy a summer or winter home, etc., those are new big expenses that you need to plan for.

Wealth-Eroding Factors in Retirement

While those are some fun expenses to think about, there are some not-so-fun ones that you need to plan for as well. Even with getting on Medicare at 65, we’ll all naturally have more health care costs as we get older. What if you or your partner requires a long-term care stay? Those aren’t getting any cheaper.

Another leading factor that can quickly erode your wealth in retirement are taxes. We’ve worked with several people who initially assumed that they’d be in a lower tax bracket in retirement. It’s easy to come to that conclusion considering that you’re no longer receiving the income from your paycheck. But here are a few reasons for why that might not be the case.

Understanding RMDs

First, it’s important to realize that Required Minimum Distributions enter the equation for people who turned 73 after January 1, 2023. The RMD age will move up to 75 in 2033. Those rules went into effect when the SECURE Act 2.0 was passed. If you aren’t familiar with RMDs, they are minimum withdrawals that you must take from certain retirement accounts.

But even if you have heard of RMDs, the rules for taking them have changed multiple times since the SECURE Act was passed, and they aren’t exactly simple to comprehend. To make sure that RMDs don’t catch you by surprise and potentially throw you into a higher tax bracket, it’s advisable to consult a tax professional.

What Tax Bracket Are You in Now … and What Tax Bracket Will You Be in in the Future?

Speaking of tax brackets, did you know that tax rates are scheduled to go up after 2025?2 That’s because the tax laws in the Tax Cuts and Jobs Act will sunset after December 31, 2025.2 That means that tax rates will revert to the higher rates from 2017.

For example, let’s say that you’re married filing jointly and have a household income of $180,000. That would put you toward the top of the top of the 22% bracket for 2023 and 2024. However, if you still have $180,000 household income in 2026, you would creep into the 28% bracket. That’s why it’s important to understand what tax bracket you’re in now compared to what tax bracket you’ll be in in the future.

How Much Have I Saved for Retirement … and Where Have I Saved That Money to?

It might sound like we’re stating the obvious, but it’s critical to understand how your retirement income is taxed. Many people come to us and have most or all their retirement savings in a traditional 401(k) and traditional IRAs. That’s great that they’ve been saving for retirement, but it’s important to understand that the funds within those accounts hasn’t been taxed yet. They’re tax-deferred assets, meaning that you can contribute to those accounts and accrue tax-free growth until you take the money out. At that point, you’re taxed on the withdrawals. So, if you have $1 million in a traditional 401(k)/IRAs, you don’t actually have $1 million.

Creating Tax Diversification

This is why having tax diversification is crucial. Instead of having all your retirement savings in tax-deferred accounts, it’s advisable to have some retirement income in tax-free Roth accounts and taxable accounts. By saving to a Roth 401(k), you’re required to pay tax on the contribution, but the funds will grow tax-free forever after that.

You can also convert funds from a traditional IRA to a Roth IRA to capture that tax-free growth after paying tax on the Roth conversion. By doing a Roth conversion in 2024 or 2025, you can essentially do it at a discount since you’re paying the tax at today’s lower rates. However, Roth conversions aren’t for everyone. For example, if you’re passionate about charitable giving, leaving enough money in your IRAs to do Qualified Charitable Distributions could make a lot of sense. If you’re considering Roth conversions, check out our Roth Conversion Case Studies below.

Have I Saved Enough to Retire

Roth Conversion Case Studies

How Much Do I Want to Spend in Retirement?

Everyone is going to save differently for retirement. And everyone is going to spend differently in retirement. Some people don’t realize how much they’re spending in retirement if they haven’t built a spending plan (A.K.A., a budget).

Let’s say that you want to spend $8,000 a month. Will that be enough to cover your everyday expenses as well as the goals you’ve laid out for retirement? And have you budgeted for unexpected expenses? Eventually, you’re going to need a new HVAC, roof, car, etc. Will $8,000 a month cover your needs, wants, and wishes in retirement? It might for some people, but for others, it might not be enough if they have more/larger expenses and goals. That’s why it’s crucial to have a personalized financial plan that considers the many things we’ve covered in this article. It all goes into answering, “Have I saved enough to retire?”

Working with a Team of Professionals to Figure Out If You Have Saved Enough to Retire

If you download the Retirement Plan Checklist, you’ll see that there are so many other specific considerations that go into determining if you’ve saved enough to retire. Don’t forget to download it and review it with your partner if you have a significant other. Even if your partner doesn’t have any interest in being in meetings with a financial advisor to go over the financial components of a financial plan, it’s critical that they’re expressing their needs, wants, and wishes.

Our CFP® Professionals work with our clients throughout the planning process, but they have plenty of help from our CPAs, CFAs, estate planning specialists and risk management specialists. Rather than expecting one financial advisor to be an expert on everything related to wealth management, can you imagine what it’s like to work with a financial planning team? Instead of imaging it, start a conversation with our team below to begin seeing what it’s like for yourself.

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There are so many things that can be overlooked when taking the DIY approach to retirement planning, especially if you’re relying on retirement calculators. Our team is ready to determine if you’ve saved enough to retire by building you a plan that can help you gain more confidence that you’re doing the right things with your money, freedom from financial stress, and time to spend doing the things you love.

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Investment advisory services offered through Modern Wealth Management, LLC, an SEC Registered Investment Adviser.

The views expressed represent the opinion of Modern Wealth Management an SEC Registered Investment Adviser. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.