The provided HTML and text describe the financial considerations for retiring comfortably in the suburbs.The provided HTML and text describe the financial considerations for retiring comfortably in the suburbs. Key Points: * A wealthy retirement involves spending twice the cost of basic living expenses. * In large cities, it costs around $1.39 million for 20 years of wealthy retirement. * In the suburbs, $3 million is recommended for a wealthy retirement, assuming $1.5 million is comfortable. * This is based on the assumption that a comfortable retirement requires 70-80% of pre-retirement income and using the 4% rule for withdrawals.
With budgets under pressure for years and savings becoming harder to come by, millions of Americans are wondering if they’ll ever be able to retire. And many who thought they had a healthy retirement nest egg are now wondering whether they’ll have to work longer than they planned or cut back on their lifestyle if they retire.
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But some people don’t just want to retire. They want to retire rich.
A new study from GOBankingRates found that a wealthy retirement — one that allows you to spend twice as much as you need to cover your city’s basic living expenses — would cost an average of $1,392,738 over 20 years in America’s largest cities. At 25 and 30 years, the averages are $1,740,922 and $2,091,198, respectively. In places like the San Francisco Bay Area, three decades of wealthy retirement could cost $5 million, $6 million, $7 million or more.
But how much savings should you build up for a wealthy suburban retirement? Turns out the ‘burbs ain’t San Francisco — but they ain’t cheap, either.
You might need $1.5 million to live comfortably for 30 years
Dennis Shirshikov, a professor of finance at the City University of New York and head of growth at real estate investment platform GoSummer, analyzes local and regional costs of living as part of his expertise.
His analysis produced a nice, round number for a wealthy retiree in the suburbs, though it’s one that many commuters would shudder to think of.
“To achieve a wealthy retirement in the average American suburb, I recommend aiming to save at least $3 million,” Shirshikov said. “This figure is based on the assumption that a ‘comfortable’ retirement nest egg would be around $1.5 million.”
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If you think $1.5 million is enough to keep you well beyond “comfortable” for at least 30 years, look at your annual pre-retirement income before you make the mistake of underestimating the savings you might need.
“Here’s the reasoning,” Shirshikov said. “Typically, a comfortable retirement requires 70% to 80% of pre-retirement income. If we assume the average suburban household earns $100,000 a year, they need $70,000 to $80,000 a year for retirement.”
The Pew Research Center conducted a COVID-era study that found the average household in major suburbs earned $101,000, so far on track with Shirshikov’s estimate.
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The 4% rule is the most common and often-cited standard for retirement planning. While it must be customized for each individual to succeed, it provides a framework for planning annual withdrawals that account for inflation and rising living costs while preserving your savings for a 30-year retirement.
This is the basis for Shirshikov’s assessment that the average suburban needs $3 million to retire rich. Remember, he said that the average suburban household making $100,000 would need $70,000 to $80,000 to maintain a similar lifestyle in retirement.
“If we use the 4% rule, which suggests you can withdraw 4% of your retirement savings each year without running out of money, $1.5 million would yield $60,000 annually.”
Keep in mind that $60,000 would be the base amount for the first year’s withdrawal. There would be larger withdrawals in subsequent years to account for inflation — but retiring rich requires a lot more than just the ability to keep up with rising prices.
“If we double this to $3 million, we will get $120,000 annually,” Shirshikov said. “This would allow for a more luxurious lifestyle, more travel and more financial security.”
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This article originally appeared on GOBankingRates.com: Here’s How Much You Need to Save to Retire Rich in the Average American Suburb
