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How Much Do You Need To Retire?

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Do you have enough money to tell your boss, as singer Johnny Paycheck would say, “Take this Job and Shove It?”

Fidelity money management company advice model says a worker who begins saving 15 percent of their salary at age 25 will have ten times their annual salary in their 60s and be on track to retire. You would also be in a good position to aggressively bargain for better pay and working conditions at your current job. But, 42 years of continuous saving 15 percent of one’s paycheck is exceedingly rare. The Plan Sponsor Council of America reported retirement plan savings rates hit a high of 12.9 percent in 2019 before the pandemic recession and not only is this celebratory rate short of what is needed, only half of Americans have a retirement plan and a willing employer.

But everywhere and often people want to know their number, the amount of money they need in order to walk away from their jobs. In polite terms it is called a replacement rate target, in non polite terms it is called another term, “Take this Job and Shove it” number.

Do I have enough money to walk away from work or tell the boss what I want to stay ?

Fidelity’s number is 10 times final salary at age 67; Aon Consulting Group’s model says 11.1. The thing is American older workers are not even close. Christian Weller, David Madland, and Keith Miller at the Center for American Progress argued that these firms might be too pessimistic but found even the most optimistic studies (for example Karen E. Smith and colleagues at the Urban Institute show four out of every 10 GEN X workers willlikely lower their standard of living in retirement.

In 2018 my The New School co-authors (Siavash Radpour, Tony Webb and I) study turned over every stone to get an accurate measure of how much of final pay people have. About 5% of people at the very top of the income distribution had 5 or more times their average pay. Most at the top didn’t even have 10 times their salary. The bottom 95% didn’t even come close. Almost no one can meet the standards of these consultants.

So Mike Papadopoulos, Tony Webb, and I swerved in doing a 2019 study and lowered the definition of “need” to see how many people in the U.S. in 2019 between the ages of 62-70 had retirement wealth if they and their spouse quit work immediately and didn’t have enough money to live on 200% of the federal poverty standard.

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Linda Barbara

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