Since the end of tax season, I have met with two new clients who are considering starting their own businesses. We discussed the benefits and disadvantages of many aspects of self-employment. I found it interesting that neither considered having a pension to be of high importance.
More and more people seem to be retiring early from their careers. For many people, this is not financially advisable. Social security, by itself, is not enough anymore. With soaring medical and living costs it is wise to have a monthly pension to supplement any social security benefits.
I counsel people who are considering retirement that you need at least ½ million dollars of net worth at the time you retire to live a comfortable, but not affluent, retirement. Between the equity in your home and any money you have saved or accumulated in a pension, the total should be ½ million dollars. If you retire at age 65 and live to be 90 years old, this will provide you about $20K a year in additional money to supplement your social security, assuming it is not invested. If invested and earning a modest return, the amount would rise to about $30K a year.
Can you live on $50K a year when you retire? If not, you may want to work longer and start saving now. Later, you will be glad you did.