Don’t Pay Attention to These Retirement Studies and Here Is Why!
So how much should you have accumulated in your investment account for retirement? Well some studies by JP Morgan and Fidelity attempt to tell you exactly how much – are they right or off base?
JPMorgan Asset Management’s 2016 Guide to Retirement reports that someone age 40 making annual household income of $100,000 should have 2.6 times that amount put away for retirement. By age 60 that multiple should be 7.3. At Fidelity, they estimate a 40 year old to have 3 times his salary and by age 60 eight times salary.
There is something to remember about the financial services industry.
Pop culture finance wants you to believe that money is an easy thing. You just do these two or three things and you will be where you need to be. They teach in absolutes. Their beliefs are preached as if they are the Gospel truths or absolute truths. There is only one absolute truth when it comes to money – that there are no absolute truths.
There are so many things wrong with these studies I don’t even know where to start.
First, for these numbers to be true you have to be living under the assumptions that are used in these studies. What is problematic is that they don’t even tell you what those assumptions are. Most of the time they are assumptions that don’t fit the average person.
Second, money is complex. To suggest that you can fit everything into a one size fits all strategy is ridiculous. It is much more complex than that. I had a financial advisor tell someone that came to see me that they needed 5 million dollars at retirement and that they were far behind. I analyzed their situation and came to the conclusion based on their unique set of circumstances that they were just fine with what they had accumulated.
Finally, the financial services industry releases these ridiculous studies and the average person reads them and realizes that they are nowhere near where they should be (according to the study). Then they get discouraged and it works as demotivation going forward.
Bottom line – don’t pay attention to these studies.
It is important to know your own personal numbers based on your own unique set of circumstances. This will tell you whether you are truly on track and not based on what a financial services company determines without knowing anything about you. Have a personalized individualized plan drawn up that is your very own and use that as the benchmark.
Bob Brooks is host of The Prudent Money Radio Show, Financial Advisor, and active money manager that consults and helps people plan.