14 Jun 2019 Do you need a million dollars to retire?

“The greatest show on television is Survivor,” is an opinion I hold dearly and would be happy to share with you, but anyway here’s an interesting tidbit about the game: Since the year 2000 when the show debuted in the U.S., the prize for the winner has not budged from it’s original amount of $1 million. For nineteen years and thirty-eight seasons it’s held steady, and I’d be shocked if it changed any time soon. (Just for reference, if you assume inflation of 2.5% over the last 19 years, the prize today would need to be about $1.6 million dollars to keep pace with the buying power of the first prize given out).

This is all to say that there is a fascination and perhaps obsession with the quantity of one million dollars which goes back a long time (way before Survivor!), and the staying power of this obsession makes it all the more interesting. Because it’s not a static number! It means something quite different now than it did in the year 2000 or the year 1970, and more importantly for our purposes today, it will mean something different in the year 2020 or 2050.

So do you need a million dollars to retire? No, absolutely not. And yes, absolutely. And well, it depends.

All of those answers are true. And they’re true not just in an intellectual exercise sort of way where I show you a figure with math and numbers that you might skip over anyway. No, they’re also true true, as in, there are actual flesh and blood people I know who are the living embodiments of each of those answers. They each wake up and go about their business as people who are retired or traveling toward retirement, and they live their lives in ways they can and should be proud of, in ways that are completely independent of the quantity one million dollars.

How can all of those answers be true at the same time? Well, let’s take them one at a time. There are lots and lots of people–the overwhelming majority of people!–who have retired and will continue to retire without one million dollars. Many do so because they have no choice–circumstances they have no control over mean that such a number is meaningless, and they make do with a number that is less, and sometimes far, far less. Others do so not because they couldn’t have saved that much money, but because they chose not to. Maybe they gave a bunch of money away, maybe they prioritized spending before retirement, maybe they just created a really simple retirement lifestyle for themselves that didn’t necessitate having one million dollars.

But there are others who do need a million dollars or more to retire! Perhaps it’s because their goal is for their retirement lifestyle to match their pre-retirement lifestyle, and that lifestyle requires more than a million dollars. Maybe they have a goal to purchase a vacation home or take certain trips or make gifts to grandkids or charities, and maybe those goals are of the sort that require more than a million dollars.

And as for the “it depends group,” there are many people who are nearing retirement who are still trying to figure out what exactly their plan needs to look like! Because for some people the hardest part of retirement planning isn’t figuring out how much money you need to do what you want to do, but instead it’s figuring out how much money you need to do what you want to do. It’s the what of retirement that can be harder to nail down than the how. But over time things become clearer, and they can move into one of the previous two categories.

I asked a rhetorical question and gave it three different (and two mutually exclusive!) answers that were all true, so hopefully you’re seeing that it was a bad question, and I do not recommend it as the basis for your financial planning process. It’s not only the wrong question–it’s not even the right sort of question. You could insert any number from zero to $100 billion into that question and it still would be a bad one, because the numbers are all arbitrary until they begin to make there way into your completely unique situation and given a proper context within time.

A better question might be, “What does retirement look like to you, and what sort of decisions do you need to make now and into the future to make that vision a reality?” That’s a longer question, and it’s cheating because it’s two questions in one, but I think it’s the one worth asking, and it’s one we love to help answer.