Don't worry about a 'magic' retirement number - but make sure you have this one thing

By Jessica Hall

'Most people have an idea of what's important but don't know how to get there'

What's your financial goal for retirement? Do you even have one?

Turns out that just 38% of investors believe in having a retirement-savings target, or a specific goal for retirement, according to a new survey by the Nationwide Retirement Institute.

Having a goal, however, can guide your savings and investing, can give you motivation to keep socking away money, and can keep you on track to retire on time, financial advisers said. But there is no one number that's right for everyone.

"If you don't know where you're going, you're not going to get there," Rob Burnette, financial adviser and chief executive of Outlook Financial Group. "A goal and a plan helps you stay on course. It gives some comfort and confidence so you're not staying awake at night."

For those that do have a figure in mind, 42% of investors believe they need between $1 million and $2 million to retire, while 18% believe they need more than $2 million saved to comfortably retire, Nationwide found.

'Every individual is unique, and every goal is unique.'Nicholas Yeomans, Yeomans Consulting Group

"Americans believe they will need over $1 million to retire comfortably - a figure that could be discouraging for even the most committed retirement savers," said Rona Guymon, senior vice president of Nationwide Annuity Distribution. "What's important to remember is that everyone's 'magic number' in retirement will vary depending on a number of variables including spending habits, health, debt levels, location and more."

This lack of a retirement goal and anxiety about an uncertain financial future is causing concern about affording necessary purchases in retirement, Nationwide said.

Investors 55 and older and those currently in retirement are most worried about paying for basic living expenses (83%), medication and other health-related items (58%) and supplemental health insurance (39%) in retirement, Nationwide found. To meet these financial commitments, this group is forgoing big and small expenses today by spending less on luxury goods (47%), leisure (44%), entertainment (44%) and vacations/trips (38%), Nationwide said.

Having a goal provides direction

Without a retirement goal, people are just saving willy-nilly - that is, if they are saving at all, Burnette said.

Americans have fairly modest retirement savings compared with their goals. According to Fidelity Investments, the average first-quarter balance in 401(k) accounts hit $125,900, up 16% from the year-earlier first quarter. The median 401(k) balance was $28,900.

"I think there's two types of goals: a numerical goal and the other is more of a planning goal," said Russell Hackmann, a financial adviser and president of Hackmann Wealth Partners.

"A plan makes sure you have adequate cash flow, makes sure the inevitable downturns don't hurt you too badly and that you can live through them mentally and financially. It also lays out your tax-planning objectives and checks whether you have adequate liquidity to pay for long-term care," Hackmann said.

'Not everyone in the world needs $1 million to retire. It's just a goal to shoot for.'Russell Hackmann, Hackmann Wealth Partners

Your financial goal will vary by where you live and the lifestyle you want, but generally speaking, Hackmann said, individuals should shoot for more than $1 million and couples should aim to save about $1.5 million.

"As much north of that you can get to is great," Hackmann said. "Not everyone in the world needs $1 million to retire. It's just a goal to shoot for."

"It's important to get to a good number. You can have problems if you don't have a plan," Hackmann said. "It gives you something to shoot for. If you're way low, it helps you know you need to double down on savings and investing. It gives you a sense of whether you can retire at all."

"Without a goal and a number, you're just wandering in the desert. We don't know if your asset allocation is right - we don't know a lot of things," Hackmann said.

It's important to establish a goal by the time you're in your 40s because those middle years can come with a lot of needs competing for your money - such as paying for your child's college education or helping older parents with care. By sticking to a goal, you can clear out some spending clutter and really get serious about saving, Hackmann said.

Everyone's goal may be different

Not everyone agrees with the idea of a $1 million goal.

Nicholas Yeomans, president of Yeomans Consulting Group, said retirement planning encompasses many factors, and it's personal.

"Every individual is unique, and every goal is unique," Yeomans said.

'Just start. Start small. Start early. If you start early, you can do it with much smaller dollars than starting later in life.'Rob Burnette, Outlook Financial Group

Once you arrive at a goal, it's important to have a backup plan for down markets, health shocks, how you'll pay for long-term care if needed and any potential upsets to your job that could force you into retirement earlier than expected.

And don't forget about Social Security and the strategies around claiming your benefits.

Set a goal early

"You should have some components of a plan with your first part-time job in high school," Burnette said. "Just start. Start small. Start early. If you start early, you can do it with much smaller dollars than starting later in life."

Keep the goals in sight, literally. Have them written down and look at them frequently to keep yourself on track, Yeomans said.

"You're more likely to accomplish those goals if they're in your face. If they're out of sight, they're out of mind. See them everyday and revisit them often to set yourself up for success," Yeomans said.

Yeomans recommends reviewing the goal each year since life changes and your responsibilities and desires may change, as well.

There are free tools online that can help you determine how much you will need to retire, or a financial adviser can help create a plan and the savings goal. Meet with more than one adviser to find someone you are comfortable with.

Read: Finding a financial adviser is like dating - you don't need to settle down with the first one you meet

"Most people have an idea what's important in retirement but they don't have any idea how to get there," Burnette said. "I can change the oil in my car, but I don't because there are people who do that for a living who will know what to do if something goes wrong. Stick to what you do and what you're good at."

Do you have questions about retirement, Social Security, where to live or how to afford it at all? We want to hear from you. Join the conversation in our Facebook community: Retire Better with MarketWatch.

-Jessica Hall

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05-25-24 0615ET

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