First Person: Retiring with $1 Million Would Mean We’re Broke

Yahoo Contributor Network

If we had to retire on $1 million, we'd scrape by in today's economy. However, my husband and I are retiring in another 30 years. By then, $1 million will be the equivalent today of getting a $5 bill tucked in greeting card. It's a nice thought, but it's not going to go very far. According to a recent MainStreet article, $1 million is not that much when it comes to a secure retirement. The article cites a new report by UBS Investor Watch that suggests it takes $5 million of investable assets to feel wealthy. In order to boost our retirement savings, we have 30 years to turn our small amount of "investable assets" into $5 million. My husband and I each need to save $2.5 million. Between the two of us, we should be able to do well as long as rising health care costs and inflation doesn't trip us up too much.

Setting unrealistic goals

Although financial experts suggest setting realistic and obtainable goals, I disagree. I won't be motivated to earn more income and take calculated risks with my money if I have a mediocre goal of saving only $1 million for retirement. Our $5 million retirement savings target goal is fairly unrealistic given my mediocre income and small nest egg so far, but it's not impossible.

Playing with income and expenses

Some people would rather earn more money, while others rather be frugal so they can put more money aside. I believe I have just as much control over how much I earn as I do over how much I spend. I define my spending, savings and earning goals and then work every day to get closer to my goals.

Being an aggressive investor

In order to accumulate $5 million, I have to be an aggressive investor. However, I try to avoid being an aggressive trader. Trading as opposed to investing in stocks can be counterproductive as evidenced by the many broke day traders. I invest with a longer time horizon in small companies as well as large companies that pay dividends. By reinvesting the dividends, I hope to get a better return on our money. I know it will be nearly impossible to reach the $5 million mark by keeping all of our money in cash.

Keeping good debt

A lot of people in their 30s and 40s are proud of paying their homes off early. I don't want to have a mortgage when I retire either, but I don't mind having one during my peak earning years. With a mortgage rate of 2.75 percent, it doesn't make financial sense to pay extra money on my mortgage. Instead, I'm funneling any extra money we have into our retirement accounts. I'm avoiding "bad debt" by paying our credit-card balance off every month.

We might never be able to reach our retirement savings target of $5 million, but it's good to aim high. If we end up with only $2 or $3 million, we won't be wealthy but we won't be broke either. According to an MSN calculator which estimates 3 percent inflation and an 11 percent return on investments, I'll have about $2.5 million in retirement if I save 15 percent of my income on top of what I've already saved. Of course, it's possible we will see a negative return on our money. I feel as though I'm walking in the dark toward retirement with my high hopes, but at least I'm not going it alone. My husband is going to start saving up for the other $2.5 million piece of our $5 million retirement pie unless health care insurance and inflation gobbles it up first.

More from this contributor:

I'm Not Gambling with my Retirement

I'm Happy in our Smaller Home

Overcoming Retirement Savings Burnout
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