A happy retirement is more than just money

Daunting numbers indeed, but these conditions speak to priorities undertaken years earlier. Many families would list education as their No. 1 goal, and given the exorbitant cost of college tuition, it only makes sense that their nest egg is less than robust.

This is an important distinction to make, that insufficient retirement savings could be more a function of conscious decisions made in the past than a failure to behave responsibly.

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Furthermore, saving for retirement is not as easy as advertised.

Glossy financial planning brochures with couples in their mid-50s riding a sailboat notwithstanding, this is simply an unrealistic expectation for many households. Given our increasing life expectancy, accumulating enough money in 35 to 40 years of working to sustain us for the remainder of our lives is no easy task.

To put this into perspective, if you take out 5 percent from a diversified portfolio each year, you stand a 58 percent chance of running out of money within 30 years of retirement.

After all, anyone taking withdrawals during the 2008 housing crisis would have a dramatically different outcome than investors who retired in 2009 and lived off market returns in the beginning of retirement. Volatility matters. This would suggest that you need $2,000,000 saved to generate $100,000 in annual income.

It’s also worth mentioning that distributions from retirement accounts are subject to ordinary income taxes. In other words, there’s a fair chance that a great many savers — unless they make lifestyle sacrifices or wiser investment decisions or have an actual pension — won’t be able to maintain their current quality of life once they leave the workforce.

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