The other day I got asked a question that I absolutely hate.
That question was, "How much should I have saved for retirement at my age?".
Now that question, on the surface is not really a bad thing. On the contrary this is something everyone should be thinking about.
The problem is when someone asks this I feel as though they're expecting a magic number as the answer.
Like, "Oh you're 45?! $450,000 should be enough."
That's not exactly how retirement planning works.
In fact I would say that because you work in Pharma this question is even harder to answer, not easier.
More Money, More Expenses
Here's the thing, the amount you need to retire is going to depend on how much money you plan on spending (big shocker right).
So that "retirement number" is going to vary greatly from one person to another.
But here's another interesting observation I've made over the years.
The more money someone makes, the more money they tend to spend.
Often called "lifestyle creep" or "lifestyle inflation" this is a pattern that comes up time and time again.
Someone who gets a huge raise ends up buying a new car, bigger house, or taking a nice vacation. Suddenly that extra savings becomes another expense.
Working in Pharma
Now if you work in Pharma there's a good chance you earn more than the average American.
It can be a lucrative career, but if you are used to earning a certain amount and then SPENDING something similar, you're probably going to have to save more to keep up with that lifestyle in retirement.
That's why searching for that quick answer of "How much should I have saved at age 50?" might actually give you a false sense of security.
You very well could have that average amount saved, but if you spend a higher than average amount you're going to need to step up your savings to account for that.
The Importance of Personalized Financial Planning
So, what's the solution to this retirement conundrum? It's all about personalized financial planning. There's no magic number or one-size-fits-all answer because everyone's financial situation and retirement goals are unique.
Think about it: your retirement needs depend on a myriad of factors such as your current lifestyle, future aspirations, health considerations, and even unexpected life events. Simply put, the amount your neighbor needs for retirement could be entirely different from what you need. Especially if you just spent the last 30 years working in a career as lucrative as Pharmaceuticals.
Factors That Influence Your Retirement Number
Lifestyle Goals: Do you envision traveling the world, starting a new hobby, or downsizing your home? Your retirement activities will significantly impact how much you need to save.
Health Care Costs: As we age, health care often becomes a more significant expense. Planning for medical costs is crucial.
Life Expectancy: With people living longer than ever, your retirement savings might need to stretch over several decades.
Inflation: The rising cost of living can erode your purchasing power over time. Your savings need to keep pace with inflation.
Debt and Obligations: Any outstanding debts or financial responsibilities, like supporting family members, will affect your retirement savings.
A tailored financial plan takes into account all these variables and more. It provides a roadmap that's aligned with your specific needs and goals. Instead of chasing a generic savings target, you're working towards a number that's meaningful and sufficient for your life.
So can I tell you what your retirement number is if you work in Pharma?
After working together to develop an in depth financial plan - Absolutely.
After a 5 minute call? - Nope.
Which speaking of...
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This is meant for educational purposes only. It should not be considered investment advice, nor does it constitute a recommendation to take a particular course of action. Please consult with a financial professional regarding your personal situation prior to making any financial related decisions. (01/21)