Wealthy Workers Are Seriously Underestimating Their Retirement Needs

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Wealthy Workers underestimate
(Alamy)

By MANDI WOODRUFF

A lot of wealthy workers could be missing a vital flaw in their plans for retirement, a new survey shows.

More than 80 percent of workers earning $115,000 say they are prepared for retirement -- but they think they'll only need $66,000 per year to live on, Charles Schwab (SCHW) found.

Sure, it's possible to survive on $66,000 a year -- plenty of people would be glad to earn half that much in a year -- but chances are high-earners won't be prepared for that kind of lifestyle change, let alone unexpected costs that could come up down the road.

Most experts agree consumers should plan on at least saving enough of a nest egg to maintain their current lifestyle in retirement. Otherwise, the only answer is to find ways to minimize costs and trim household budgets.

That starts with figuring out what age you plan to retire, and these days, workers are planning on working well past the typical 65th-birthday benchmark.

Couple that with the fact that we're living longer than ever as well, and retirees could wind up spending 15 to 20 years living off just their nest egg alone.

The biggest hurdle retirees will almost certainly face is the rising cost of health care.
"Even with Medicare benefits, a 65-year-old couple could need nearly $400,000 to cover out-of-pocket health care costs during retirement, according to research by the Employee Benefit Research Institute," noted Carrie Schwab-Pomerantz, Charles Schwab senior vice president. "The bottom line for everyone is that health care costs need to be carefully factored into retirement plans."

No one can predict whether they'll need long-term medical care in the future, but there are steps people should take now to mitigate those issues as early as possible.

First, review your retirement goals with your spouse or partner and think about running it over with a financial advisor. Fee-only financial planners have a fiduciary duty to work in the best interest of clients, and you won't have to worry about commissions or other hidden fees that could sneak up on you.

Just half of Americans said they're saving through a retirement plan like a 401(k) or IRA, according to a recent survey by the EBRI. While not everyone might be able to max out a retirement plan contribution each year, even contributing a small portion of each paycheck to a retirement account could be a big difference in the long run.

"Especially for those looking to catch up on savings, we recommend maximizing contributions in a 401(k) at least up to the employer match, considering other tax-advantaged retirement accounts such as an IRA, and finding ways to automate savings," Schwab-Pomerantz says.

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gmsexton

the secret isn't about income it's about debt and out go of cash... you save 15% your whole life to pay mortgage debt.. auto debt and other expenses... if you have half a brain... those things disappear... i watched my mother and father retire... he was brilliant. went to my mother two years out and said anything you want done to this house.. do now.. any remodel etc.. they did some kitchen and bathroom etc remodels... then he bought a new mercedes... cash.. and paid the mortgage off in that two yeara period... this was in 1987 btw... his income was around 110 to 120 K a year... he lived quite comfortable on 66K a year... he had no debt... the company paid for his supplemetal insurance... he literally had a monthly nut of 1000 bucks for insurance... taxes and utilities... and 4500 a month for living.... like i said.. it's isn't about income... it's about expenses.. and outgo... plan for that as much as savings.....

March 29 2013 at 12:51 PM Report abuse rate up rate down Reply