In past generations, having a million dollars meant a lifetime of luxury.
For the past several decades, it was the standard threshold guaranteeing a comfortable retirement.
But today? It's only a fraction of the money you'll need to save up in order to retire.
A cool $1 million has long been considered the gold standard of retirement savings. These days, it's only a fraction of what you will really need.
For instance, a 67-year-old baby boomer retiring now with $1 million in the bank will generate $40,000 a year to live on adjusted for inflation and assuming a sustainable withdrawal rate of 4 percent, said Mark Avallone, president of Potomac Wealth Advisors and author of "Countdown to Financial Freedom."
It's worse for a 42-year-old Gen Xer, whose $1 million at retirement will only generate an inflation-adjusted $19,000 a year when all is said and done. And a 32-year-old millennial planning to retire at 67 with $1 million would live below the poverty line.
That's what Avallone, a certified financial planner, calls "million-dollar poverty."
For most Americans, there's been a serious lack of proper investment income and planning, Avallone said. That, coupled with inflation, a looming pension crisis and longer life expectancy, is "a toxic formula for successful retirement," he said — one that will result in a dramatic drop-off in lifestyle for retirees.
"Today's generation of working people grew up in an era where their parents went to a mailbox, and a check appeared. But pensions are almost extinct," Avallone said. "People have to self-fund their retirement, and the enormity of that challenge is underestimated."
WalletHub conducted a study this year to determine how long a nest egg of $1 million would really last. The personal finance site compared average expenses for people age 65 and older, including groceries, housing, utilities, transportation and health care.
Naturally, depending on where in the U.S. you live, the longevity of a $1 million nest egg varies. Those dollars stretched furthest in states like Mississippi, Arkansas and Tennessee, where retirees could live a life of leisure for at least a quarter of a century.
However, in Hawaii, where residents pay roughly 30 percent more for household items across the board, that same amount will only get you just shy of a dozen years — largely because of that higher cost of living and pricey real estate.
Considering that many families spend more than 100 percent of their income after taxes on monthly expenses alone, there are only two ways to overcome million-dollar poverty, Avallone said: Earn more or spend less.
Here are the states where a $1mil retirement will go the least/farthest:
Click here to read the full article