Artful Aging

Is Your Financial Plan on Track for a Happy Retirement?

You can be happy with or without money. It is not an actual source of happiness, but it is a tool to make happiness a lot easier to find, particularly in retirement.

If you are already in retirement, congratulations! If you’re still working toward it or know someone who should be thinking about their own future (like your kids or grandkids), let’s consider a sample retirement without adequate wealth.

Imagine being 66 years old and are ready to retire. You have low savings and are one of the 69 percent of Americans without a pension. As an average wage earner, you are eligible to collect the 2018 average Social Security benefit of $1,413.37 per month. What kind of retirement will you enjoy?

It won’t likely be one filled with joy as you’ll be wondering where your next meal will come from, since the average one-bedroom apartment rent in King County will eat up most of your Social Security check.

On the other hand, having $250,000 saved provides the potential for an additional income of about $1,000 of extra income per month. While that still is not enough to live well in our expensive region, it can better sustain you.

One of the most frequent questions I hear is “How much do I need to have saved and invested to enjoy a comfortable retirement?”

In the Seattle area, that amount will be much higher than it would be in Spokane or in the U.S. Midwest. The answer requires asking you a question: How much income will you need every year to support your expected lifestyle?

Answering that question requires a bit of work on your part. You need to create a retirement budget that includes housing expenses, utilities, food, medical costs, and the price of any pleasurable pursuits. Add to that an emergency cushion of about 10 percent and increase the total annually for inflation.

Once you have that monthly number, visit for your expected monthly benefit and subtract that amount from the total. If you’re lucky enough to have a pension, subtract that next. The amount left is the income that your retirement savings will need to provide.

How much income can you expect from your retirement portfolio? It depends on your tolerance for risk. However, one of the best benchmarks is the payout on immediate annuities (which require you to give up ownership of your principal in exchange for a guaranteed monthly income for the rest of your life). As of last year, the best income you can expect would be about $625 per month per $100,000 payment to the insurance company.

If you want to maintain ownership of your principal, a reasonable rule has been 4 percent per year or about $330 per month on a $100,000 investment.

Using the 4 percent figure, a $1 million portfolio plus the average Social Security benefit would provide a pretax income of about $4,750 per month. Definitely not enough for a lavish lifestyle, but probably adequate to sustain a comfortable way of life.

Yet, only about 15 percent of all American retirees have $1 million or more saved for retirement. The median wealth of those in retirement is only $200,000. That’s barely enough to keep from going to bed hungry.

Money may not always bring happiness, but it does have the power to reduce unhappiness. That is why it’s imperative that those nearing retirement reduce expenses and increase their investments. Meanwhile, those who still have time (like your progeny) must understand that their future will require money to be a happy one—and probably a lot more than they think. So the sooner they get started, the happier they are likely to be.

The host of the nationally syndicated Don McDonald Show for over 20 years, Don now co-hosts Talking Real Money with Tom Cock on Seattle’s KOMO radio Saturdays at noon ( Don also publishes the investing magazine, real investing journal (

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