What Retirement Net Worth Puts You In The Top 1%

Everybody wants to know if they're doing okay financially in retirement, but what if I told you that the income numbers and the net worth numbers that put you in the top 1%, 10% or 25% only matter if you could do three other things exceptionally well. Over the past 16 years of helping people retire, I've learned something that might surprise you. The happiest retirees aren't necessarily in the highest percentiles. So today I'm gonna show you exactly what income levels and net worth levels put you in each category, but more importantly, I'm gonna share the three things that make sure you're optimizing for the life you want and not just the percentile that you're in. So let's start with a reality check that might make you feel better about your current retirement situation. According to a recent survey of consumer finances data, here's what retirement income actually looks like for Americans who are between 65 to 69. The median household retirement income that's middle of the pack is just over $50,000 per year. And that includes money from social security, pensions, withdrawals from retirement accounts like 401ks and IRAs. Now, before you panic if you're below that number or if you get overconfident because you're above it, let me put this in perspective. I met two people who retired in the same year. Robert had an income of, a retirement income of $150,000 per year, well above the median, but he was miserable. He spent his days worrying about the market volatility and all the things going on in the world. He was checking his accounts obsessively and he was constantly worrying about if he had enough. And then Linda had a retirement income of $60,000 per year, but she was thriving. She had a clear plan, she understood her expenses, and most importantly, she had embraced what I call enough thinking instead of more thinking. Now you can guess which person was happier. And that brings me to this first important point, which is your happiness in retirement isn't determined by what percentile you're in, it's determined by whether your income matches your lifestyle and your peace of mind. But now let's take a look at what it actually takes to be in the top 25% of retirees. From a net worth standpoint, and remember net worth also includes your home equity, not just retirement accounts, you'll need between $395,000 and $1.16 million. I'll share where I'm getting the data below this video. But the interesting about that is that thousands of retirees were asked the question, how much do you need to feel comfortable in retirement? And the answer is consistently around $1.2 million. In reality, according to the Survey of Consumer Finance, that's only about 3.5% of Americans actually reached the million dollar or more amount for what their net worth is in retirement. I had a client a couple years ago who felt behind because they only had $600,000 in retirement savings. To them only had 600,000, that's significant. But when we calculated their full net worth, including their paid off home, which was about $400,000, they realized they were actually in the top 25% of Americans. The lesson is don't just look at your 401k balance or retirement accounts, look at the complete financial picture. Now the next stage is top 10%. And to be in the top 10% of American retirees, by net worth, you need above $2.9 million. But here's where it gets interesting. I've worked with clients who've had 3 million, 4 million, 5 million, or more in net worth. And many of them can be more stressed out than clients who have 500,000 or 800,000 or less than a million. And I believe the reason why is because they're playing the wrong game. They're still focused on accumulation instead of optimization. They're focused on the number instead of the income they need to get from that number. I've shared this story before. You may have heard it, but I had a client come in and his main question was, how long till I hit $5 million? I said, good question. Let's pull up the plan and see what it looks like. And when you get there, what's important about getting to $5 million? He said, that's my goal number. That's what I want to get to. I said, great. Then asked, what happens when you hit that number? And he said, I'll be happy. That's the number that I'm going for. And I said, what is 5 million gonna do for you when you get there? And then he finally said, I just want to make sure that my wife is gonna be okay if I were to die tomorrow. So bingo, we pulled up his plan and we looked at the income that his wife would need if he was gone. And the surprising part, he had already saved enough and he could fund his needs for his wife if he did die tomorrow. So that was just a load off his shoulders and that changed the planning scenario completely and what he decided to do next. So don't focus on just the number, focus on creating that tax efficient withdrawal plan that's gonna fund your needs. And if your advisor isn't talking about this sort of tax efficient withdrawal planning or income planning, apply for a retirement planning session below this video. Now onto the top 1% of retirees, you would need a net worth of 21.7 million or more. Now, if you're in this category, congratulations, but for the other 99% of us watching this video, here's what I want you to understand. You don't need to be in the top 1% to have an amazing retirement. In fact, let me share some data that's gonna surprise you. And before I get into the next part, let me know how this is landing with you. Click the like button if it's been helpful so far. So here's the surprising part. 86% of seniors who have a total savings between $50,000 to $100,000 reported that they're doing okay and they're living comfortably in retirement. They're satisfied with their retirement. That data comes from a federal reserve study. And if you're thinking there's no way, that can't be possible, I believe it's true for two reasons. Number one is Arthur Brooks did some research around happiness and he found that it comes from managing the gap between your needs and your wants, not from having more money. These retirees, they likely adjusted their expectations to match their resources instead of chasing an arbitrary number. And I learned recently that not wanting something is as good as having it. That's deep, but do you think that's true? I'd like to hear if that's true in the comments below. Is not wanting something as good as having it? And then the second point is, I believe it's true because for the majority of Americans, Social Security covers most of their basic expenses. The average couple receives between 40 to $50,000 per year in Social Security alone, which can be significant for people if their needs and expenses are managed. And when your foundation is solid and your expectations are realistic, you don't need millions to be satisfied. And that brings me to an important part of this video. And then I'll get to the three steps to take in retirement or before retirement. But the question is not what percentile am I in? The question is, do I have enough for the life that I wanna live? I've seen people with $2 million who are miserable because they constantly compare themselves to people with $5 million. And then I've seen people with a lot less who are thriving because they designed a life that fits their resources. The difference wasn't money, it's the mindset. So here are those three things I mentioned that are more important than the percentile you're in. Number one is define what enough actually means for you. Not what the articles say, but what gives you peace of mind. And then two, design a retirement around experiences and not percentiles. The happiest retirees, they look to optimize for their life, not for rankings. And then three, let go of comparison to really embrace your own path. Chasing someone else's definition of success steals your joy. Now, if you're looking for more practical financial steps to implement, here's four of them for you. Number one is get crystal clear on your expenses, what you believe your expenses will be in retirement. Track your spending for three months. You can use Monarch Money or one of those ones that does it automatically for you and it categorizes everything. Then adjust it for retirement. So if you're not retired yet, still track it and then see if you can adjust for retirement because you'll be spending less on clothes maybe or commuting, but you might be spending more on healthcare and travel. Number two is build out your complete income picture. So social security, pensions, even though they're rare, part-time work, if you might do that, and then sustainable withdrawals from your savings. And then third, run the math with a proper financial planning tool. You could use Excel like a lot of people start with, but there's other tools out there like the one that I've linked to below that actually are just for retirement planning. So it accounts for taxes and inflation and market volatility and things like that. That could be worth a look at. And then fourth, like I mentioned before, define what enough means for you personally. Not what an article says or not what your neighbor has, but what gives you peace of mind for the lifestyle that you want. Let me know if this was helpful by clicking the like button. And if you wanna dive deeper into creating a retirement income plan that's optimized for your happiness, check out the videos that pop up on the screen. Thanks for watching. And remember, you don't need to be in the top 1% to live your best retirement. You just need to be smart about the resources that you have. I'll see you in the next one. Take care.