Personal Finance
Is $1 Million Enough for Retirement in America?
Is $1 Million Enough for Retirement in America?
The average American needs their retirement savings to last them 14 to 17 years. With this in mind, is $1 million in savings enough for the average retiree?
Ultimately, it depends on where you live, since the average cost of living varies across the country. This graphic, using data compiled by GOBankingRates.com shows how many years $1 million in retirement savings lasts in the top 50 most populated U.S. cities.
Editor’s note: As one user rightly pointed out, this analysis doesn’t take into account interest earned on the $1 million. With that in consideration, the above calculations could be seen as very conservative figures.
How Long $1 Million Would Last in 50 Cities
To compile this data, GOBankingRates calculated the average expenditures of people aged 65 or older in each city, using data from the Bureau of Labor Statistics and cost-of-living indices from Sperling’s Best Places.
That figure was then reduced to account for average Social Security income. Then, GOBankingRates divided the one million by each city’s final figure to calculate how many years $1 million would last in each place.
Perhaps unsurprisingly, San Francisco, California came in as the most expensive city on the list. $1 million in retirement savings lasts approximately eight years in San Francisco, which is about half the time that the typical American needs their retirement funds to last.
City | How long $1 would last (years) | Cost-of-living Index | Annual expenditures (after using annual Social Security) |
---|---|---|---|
Memphis, TN | 45.3 | 76 | $22,043 |
El Paso, TX | 40.3 | 81.4 | $24,789 |
Wichita, KS | 39.7 | 82.1 | $25,145 |
Tulsa, OK | 38.8 | 83.2 | $25,705 |
Indianapolis, IN | 38.6 | 83.5 | $25,857 |
Milwaukee, WI | 37.6 | 84.9 | $26,569 |
Oklahoma City, OK | 37.3 | 85.4 | $26,824 |
Columbus, OH | 37.2 | 85.5 | $26,875 |
Kansas City, MO | 36.7 | 86.2 | $27,231 |
Detroit, MI | 35.8 | 87.6 | $27,943 |
Baltimore, MD | 35.3 | 88.2 | $28,248 |
Louisville, KY | 35.3 | 88.4 | $28,349 |
San Antonio, TX | 34.4 | 89.7 | $29,011 |
Omaha, NE | 34.3 | 89.8 | $29,062 |
Albuquerque, NM | 33.6 | 91.1 | $29,723 |
Tucson, AZ | 33.3 | 91.6 | $29,977 |
Jacksonville, FL | 32.3 | 93.5 | $30,943 |
New Orleans, LA | 30.8 | 96.3 | $32,367 |
Houston, TX | 30.8 | 96.5 | $32,469 |
Charlotte, NC | 29.6 | 98.9 | $33,690 |
Forth Worth, TX | 29.3 | 99.8 | $34,148 |
Arlington, TX | 28.8 | 100.6 | $34,554 |
Philadelphia, PA | 28.6 | 101.2 | $34,860 |
Nashville, TN | 28.5 | 101.4 | $34,961 |
Dallas, TX | 28.4 | 101.6 | $35,063 |
Raleigh, NC | 28.2 | 102.3 | $35,419 |
Fresno, CA | 28.1 | 102.6 | $35,572 |
Phoenix, AZ | 27.6 | 103.7 | $36,131 |
Mesa, AZ | 27.4 | 104.2 | $36,385 |
Colorado Springs, CO | 27.3 | 104.5 | $36,538 |
Virginia Beach, VA | 26.9 | 105.6 | $37,097 |
Minneapolis, MN | 26.6 | 106.5 | $37,555 |
Chicago, IL | 26.4 | 106.9 | $37,759 |
Atlanta, GA | 26.3 | 107.5 | $38,064 |
Las Vegas, NV | 24.8 | 111.6 | $40,149 |
Sacramento, CA | 22.9 | 118.2 | $43,506 |
Austin, TX | 22.7 | 119.3 | $44,065 |
Miami, FL | 21.7 | 123.1 | $45,998 |
Denver, CO | 20.4 | 128.7 | $48,846 |
Portland, OR | 20.0 | 130.8 | $49,914 |
Washington, D.C. | 16.4 | 152.1 | $60,747 |
San Diego, CA | 15.4 | 160.1 | $64,816 |
Long Beach, CA | 15.3 | 160.4 | $64,969 |
Boston, MA | 15.1 | 162.4 | $65,986 |
Seattle. WA | 14.0 | 172.3 | $71,021 |
Los Angeles, CA | 13.9 | 173.3 | $71,530 |
Oakland, CA | 13.8 | 174.4 | $72,089 |
New York, NY | 12.7 | 187.2 | $78,599 |
San Jose, CA | 10.8 | 214.5 | $92,484 |
San Francisco, CA | 8.3 | 269.3 | $120,355 |
A big factor in San Francisco’s high cost of living is its housing costs. According to Sperlings Best Places, housing in San Francisco is almost 6x more expensive than the national average and 3.6x more expensive than in the overall state of California.
Four of the top five most expensive cities on the list are in California, with New York City being the only outlier. NYC is the third most expensive city on the ranking, with $1 million expected to last a retiree about 12.7 years.
On the other end of the spectrum, $1 million in retirement would last 45.3 years in Memphis, Tennessee. That’s about 37 years longer than it would last in San Francisco. In Memphis, housing costs are about 2.7x lower than the national average, with other expenses like groceries, health, and utilities well below the national average as well.
Retirement, Who?
Regardless of where you live, it’s helpful to start planning for retirement sooner rather than later. But according to a recent survey, only 41% of women and 58% of men are actively saving for retirement.
However, for some, COVID-19 has been the financial wake-up call they needed to start planning for the future. In fact, in the same survey, 70% of respondents claimed the pandemic has “caused them to pay more attention to their long-term finances.”
This is good news, considering that people are living longer than they used to, meaning their funds need to last longer in general (or people need to retire later in life). Although, as the data in this graphic suggests, where you live will greatly influence how much you actually need.
Personal Finance
Ranked: What People Value Most in a Financial Advisor
Positive reviews and recommendations are some of the least important factors—so what do people look for in a financial advisor?
Ranked: What People Value Most in a Financial Advisor
Are advisors putting their focus where it matters? You might think that positive reviews and recommendations would be a top consideration for people choosing a financial advisor. However, other qualities appear to be much more important.
This graphic uses data from Morningstar’s Voice of the Advisor report to outline what people value most in a financial advisor.
The Qualities Investors Value
Morningstar surveyed 400 people: 100 Caucasian women, 150 women of color, and 150 men of color. The values below show how often people chose an item as most or least important when working with an advisor.
Quality | Most Important | Least Important |
---|---|---|
Expertise and knowledge in financial planning and investments | 60% | 11% |
Personalized financial advice that meets my specific goals and needs | 54% | 16% |
Ability to understand my risk tolerance and appropriately align my investments | 47% | 17% |
Specialization in specific financial situations, such as retirement planning | 45% | 17% |
Ability to communicate complex financial concepts in an understandable way | 42% | 22% |
Transparent fee structure and pricing for my advisor’s services | 42% | 22% |
Trust and rapport established during the initial meetings with my advisor | 36% | 24% |
Ability to incorporate investment options that reflect my values | 22% | 41% |
Positive online reviews or ratings about my advisor’s services | 22% | 46% |
Recommendations from friends or family who had a positive experience with my advisor | 20% | 47% |
Commitment to diversity and inclusion, making me feel comfortable and respected | 20% | 47% |
Recommendations from other professionals, such as accountants or attorneys | 19% | 50% |
Shares a similar background or cultural understanding | 10% | 68% |
Participants were asked the following question: “On each screen, we will show you 3 items to think about when working with a financial advisor. Select which one is most important and which one is the least important of the items. You will see more than one screen and items may appear more than once.”
Enjoying this content? Dive into more insights in the Voice of the Advisor Report:
Even among a survey pool that was mostly people of color, the majority of respondents didn’t think a commitment to diversity or a shared background were important.
Instead, three of the top four factors were related to personalization.
Personalization: A Key Quality in a Financial Advisor
People cared deeply about personalization regardless of gender and race. It was even more important to those with more than $250,000 in assets, suggesting that personalization may become more critical as a person’s portfolio value increases.
Even investors not currently working with an advisor and non-investors noted that personalization would be a top quality they would look for in a financial advisor.
Within personalization, people noted risk management was a very important element. Financial advisors can highlight their ability to tailor financial plans based on each person’s risk tolerance in order to attract clients.
Looking for tips on how to grow your advisory business? Get insights on what investors want, and how other advisors are evolving, in Morningstar’s Voice of the Advisor report.
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