To avoid the million-dollar retirement myth, start with your ‘why’

By Amy Masters, CFP^®

I was a little nervous as I sat down for a long-awaited financial planning meeting with Ellen, an older and highly respected member of my church. It was four years ago, and she was considering retiring, but she wanted to look closely at the numbers first to be sure she was ready. When we sat down together, I was surprised that this poised, confident woman I’d known for years suddenly looked like a deer in the headlights. It was clear that she was even more nervous than I was! As soon as she spoke, I found out the reason. “I’m terrified Amy. I just don’t have a million dollars to retire!” As soon as I heard her words, I knew I could help.

Why? I knew Ellen’s age and I knew how much she’d saved already. Even more importantly, I knew her lifestyle and, at least a basic level, I already knew her ‘why’. It was everything I needed to assure her that she had more than enough in her portfolio to plan a comfortable retirement.

I think about that experience all the time. Ellen had put off meeting with an advisor because she felt she’d failed at saving for retirement. The reason? Her circle of girlfriends had convinced her that it wasn’t possible to retire without a million dollars or more in savings. That pie-in-the-sky number had created tremendous anxiety. If Ellen had known to begin by asking what she was saving for and why, that stress could have been avoided entirely.

Ellen isn’t the only one who has been misled by the million-dollar retirement myth. So often when I sit down with a new client, the first question they ask is, “How much do I need to retire?” And right off the bat, they assume they need $1,000,000. My reply is always the same. “Money itself isn’t the ultimate goal, it’s just the tool to help you achieve your goals. Let’s start by figuring out your vision of retirement. Once we know your ‘why’, we can figure out how much money you need to make your retirement dreams come true.”

What is your ‘why’? To find the answer, start by asking yourself these important questions:

1. What does “retirement” look like to me?
   How do you picture your life in retirement? It’s different for everyone. Susan is single and loves her work-from-home job, so her retirement includes working part-time, having lunch with friends when she chooses, and enjoying the financial freedom that comes with a regular paycheck. Alan and Angela focused on saving and investing during their working years, retired at 65, and now they spend their time and money traveling and enjoying their grandkids. Susan doesn’t need a million dollars to retire. Alan and Angela need quite a bit more. Their lives are different. Their goals are different. And their retirement income needs are worlds apart.
    
2. What’s on my bucket list?
   Is spring in Paris something you’ve been dreaming about for decades? Is there a Great American Novel you’ve been longing to write? What about a trip to Disneyworld with your grandkids? Make your bucket list and figure out what inspires you. Consider what you can do now, what needs to wait until retirement, and what the price tag is for each item.
    
3. Who are my retirement heroes?
   Of the people you know who have already retired, who among them is living your dream retirement? Basking in the Florida sunshine or moving abroad may sound amazing, but will you be sad every time you miss a grandkid’s birthday or soccer game? For some, staying in their own home is ideal, while others are energized by the friends, activities, and lifestyle provided by a senior living community. Explore what works for others—and why—and begin designing a retirement that’s right for you.
    
4. Will my lifestyle cost more or less in retirement?
   Many people assume their cost of living will be lower in retirement, but unless you plan to sit in a hammock reading all day, having more time on your hands can be pretty costly. With more free time, it’s easy to end up eating out more, playing more golf, or finally having the time to travel—and every one of those activities costs money.

Once you’ve painted a clear picture of your ideal retirement, you can begin to figure out how much you really need to save to make that vision come to life. A million dollars may be an easy number to talk about over lunch with friends, but knowing how much you really need to save for retirement requires exploring your ‘why’ and examining your current and future finances to come up with a goal that works for you. The icing on the cake: with a plan in place, you’ll have the clarity and confidence to enjoy life today, knowing that you’re on your way to making tomorrow’s dreams come true.