Setting a savings target for your nest egg — say, $500,000, $1 million, or whatever — can be an effective step in preparing for retirement. But it’s not nearly enough.
You also need to have a reasonable sense of how much income your nest egg will generate after you retire.
Unfortunately, when researchers recently queried nearly 600 workers as part of a broader survey of American adults for the Wells Fargo/Gallup Investor and Retirement Optimism Index, they found that most of them weren’t very good at putting these two crucial pieces of the retirement-planning puzzle together.
The researchers started with a simple question: Do you have a specific number in mind for how much money you need to have saved by the time you retire?
Just over half — 53% — answered that they did, with roughly half estimating they’d need $1 million or more and just under a third figuring they’d require $500,000 or less.
So far, so good.
The researchers then dug deeper, asking those who had a savings number in mind to also estimate how much income they could expect to draw from their savings each year in retirement. The number of workers who had a savings target and were also able to come up with an income estimate dropped to roughly 40%.