You Need A Million Dollars

About Latest Posts Motley Fool StaffThe articles listed on this page are compiled by our team of Foolish Writers and …

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

We hope we don't ruin your day with this news flash, but you know that comfy retirement you're dreaming of? The one where you wake up without an alarm clock every day, and tend to your veggie patch, and take up kayaking?

The one where you and your partner finally travel to Greece, Norway and China and all the places you've longed to visit? Well, it might not happen. Sorry.

Here's the problem

You might not have enough money. That's because many of us are saving and investing and just hoping for the best in our golden years, without taking the time to determine how much we really need to accumulate. Many of us might end up with gruesome retirements.

To make your nest egg last, you should plan conservatively and withdraw about 4% of your savings per year in retirement (adjusting the amount for inflation).

Let's say you have an impressive $400,000 tucked away by retirement. Take 4% of that and you'll have $16,000, or $1,333 per month. Not so much, is it? It might be enough to scrape by on, but not enough to reach many of your dreams.

You'll need more

So odds are, you'll want to retire with a nest egg that's considerably larger than $400,000, if you can. For many people, a million dollars (or more) is a reasonable target.

With that, your 4% will come to $40,000 in the first year, or $3,333 per month. It still might not sound too much, especially when you compare it to the average annual wage of around $68,000, but it's a darn sight better than $16,000.

It's also important to remember that in retirement, you'll often be able to live on less than you do now because:

* You won't have commuting costs, or workplace-wardrobe costs, or $10-lunch-from-the-deli-near-the-office costs.

* If your income is lower, your taxes and tax rate will be lower.

* Your home might be paid off by then.

* You probably won't be supporting dependents in retirement.

* You probably won't be tucking away money for retirement, in retirement.

* You may enjoy senior discounts on health, travel and other expenses.

But you may also need more money to live off of, because:

* Health-care costs have been skyrocketing and they may not be under control or reasonable when you retire.

* You may want to buy a more expensive home.

* Inflation may erode much of your purchasing power.

* You may want to enjoy some costly activities, such as golf, flying lessons, or travel.

You can have more

Fortunately, it's not too late to salvage your retirement.

For one thing, you can start saving and investing more. If you've been putting aside $5,000 for retirement every year, try saving $8,000 or even $10,000 instead. You might double your results that way. You might also consider postponing your retirement date by a few years, too, because just two or three more years can add hundreds of thousands of dollars to your nest egg.

You can also improve your lot by allocating your dollars more effectively. If you've been a conservative investor, sticking mainly with savings accounts, term deposits and mattresses, consider moving a bigger chunk of your assets into shares. You don't have to throw caution to the wind and speculate — you can instead opt for solid earners and growers, including some dividend payers.

Now here's some great news: A $15,000 investment in a term deposit that pays you, on average, 5% over 20 years will turn into $40,000. But invested in shares that average 10% annual returns — about the market's historical rate — it will become $100,000 over 20 years! Make that a $150,000 investment, and you're looking at possibly ending up with $1 million.

What to do

Reaching a million dollars, or coming closer than you ever planned, is not out of the question. So spring into action and your retirement might end up vastly improved.

Join The Investor Revolution

In our free email, Take Stock, we explore investing strategies, pontificate on the state of the global economy and what it might mean for your share portfolio, plus much more.

Take Stock is an integral part of The Motley Fool's Investor Revolution. If you'd like to join us on our campaign to empower individual investors, enter your email in the box below. As you would expect from The Motley Fool, we totally respect your privacy, and we'll never sell your email onto 3rd parties.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »