9Funding Longevity: Retirement Is the Biggest Purchase of a Lifetime – That Many Can't Afford

PEOPLE SAVE FOR RETIREMENT gradually, but if you think of the ultimate price tag, it's the biggest purchase of a lifetime. Retirement costs far more than all of life's other big-ticket items – buying a home, raising a child, paying for college. The average “cost” of retirement is over $1,000,000 (Figure 9.1). The cost keeps going up, not only with inflation, but also with longevity. As people spend more years in retirement, they'll need a lot more funds.

Most Americans are unaware of that price tag. A truly alarming eight in ten have reported that they have no idea how much money they'll need for a comfortable retirement. But they are beginning to realize that they are underprepared – in many cases by a great deal. Only 45% of Americans over the age of 60 feel their retirement savings are on track (Figure 9.2). In fact, the average 60-year-old pre-retiree has saved only about $135,000 toward their retirement.1

How far behind are Americans in funding their retirements? The answer depends on whom you ask and how it's measured. Using the rule of thumb that retirees need 75% of their pre-retirement annual income, the Center for Retirement Research at Boston College estimates that half of all working households are at risk of being unable to maintain their standard of living in retirement based on their current savings and retirement income sources. Half of the households age 65+ are in ...

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