Your net worth indicates how comfortable your financial future may be. Find out how to calculate your net worth and track it over time. How you compare by age as an individual or as a couple will help you make better financial decisions.
How Much Do You Need to Save for Retirement?
Now that you understand what net worth is and how it relates to your financial future, let’s get back to the anonymous caller’s question. She wants to know a good way to measure her net worth and her husband’s together.
The Federal Reserve statistics that I’ve reviewed are by household. Couples who plan to share their financial lives and eventually retire together should plan together. Start by completing the Personal Financial Statement for everything you both own and owe and compare your combined net worth to the median data for your age.
It’s no surprise that wealth is correlated with family structure, such as being married, single, or having children. Having more earners or lower living expenses allows a household to attain higher levels of net worth.
If you and your spouse or partner have a household income of $150,000, you might aim for a combined nest egg of $1.5 million.
Most couples need to accumulate about 10 times their household income to generate enough retirement income. So, if you’re married and have one breadwinner who earns $100,000, having $1 million is a wise goal to maintain your lifestyle in retirement. If you and your spouse or partner have a household income of $150,000, you might aim for a combined nest egg of $1.5 million.
However, if you plan to significantly increase your spending in retirement by traveling or owning a second home, you may need more. Likewise, if your dream is to simplify your life and downsize your lifestyle, you may need a smaller nest egg to be comfortable.
It’s reasonable to assume that you could get a 5% return on your wealth in retirement. That comes to investment earnings of $50,000 a year from $1 million or $75,000 from $1.5 million.
Remember that once you or your spouse collect Social Security benefits, you’ll have that additional income to count on. But the longer you delay taking it, the bigger your monthly retirement check from the government will be.
There are many unknowns in retirement planning but using these savings goals and basic income calculations give you a target to shoot for. You can also use a good retirement calculator to figure out if you and your spouse or partner are saving enough each month to hit your savings goal.
You’ll find a link to my favorite online retirement planning calculator in the free Personal Financial Statement. If you’re not on pace to have what you’ll need, you may need to delay your retirement age, radically decrease your cost of living, or step up your savings rate.
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