If you have $500,000 in retirement savings, you’re rich‼️ Not so fast🤑
In fact, if you took that money and purchased an immediate annuity at age 65 for life, you would receive about $2,791 per month or, if you follow the 4% rule and withdraw 4% each year, in the first year your monthly income is $1,666. Still feel rich⁉️
And then you must pay income taxes on your income … oops‼️
And remember, these are retirement income resources; tap your netegg for any other purpose and your retirement income plan is kaput. You need assets beyond retirement savings.
A new study has found that one difficulty workers saving for retirement have in judging whether they’re on track is that they could be under the “illusion of wealth” or, conversely, under the “illusion of poverty.”
The study, “The Illusion of Wealth and Its Reversal,” published in the Journal of Marketing Research, found that the format in which information is presented affects an individual’s perception of wealth (or poverty).
Currently in the U.S., the paper finds, a third of nonretired households have no retirement savings, and half aren’t putting enough away to support them in retirement at their current rate of consumption.
And while plenty of factors could play into this inadequate level of savings, one psychological factor that could be behind it is that “people at lower wealth levels overestimate the adequacy of their retirement savings because of the format in which these are presented (i.e., as a lump sum), and thus they become less inclined to save.”