My husband and I have been thinking a lot about our net worth and I’m tempted to share the figure with you. Should I?
We’re both big savers – mostly out of insecurity that we won’t have enough money someday – but I’ve never shared how much our savings add up to. With anybody.
Part of the issue is privacy, and part of it is the fact that we don’t have a comprehensive retirement plan. This is where you come in. I feel like if I shared our net worth I’d get a lot of feedback on how to go about fashioning a comprehensive retirement and savings plan. Which is part of our insecurity.
How much do we need to save? How should we be investing it?
Last time I checked, we are saving 26% of our income.
That’s a lot, right?! Like I said, we’re both driven to save from deep insecurities that we will run out of money. (Feel free to provide your own pop psycho analysis of that!) And we both try to spurn commercialism as much as possible. (One exception being that we love to eat out.)
So how are we saving?
We max out our ROTH IRAs, which is $5,000 a year. Hardly enough to retire on. We both contribute a few thousand dollars a year to our 401k plans (mine’s actually a 429 plan because I’m self employed). We own our home, so we are building equity in our home each month. And we set up 529 college savings plans for our children – which won’t contribute a dime toward our own retirements, so I’m not sure if we should include this in our net worth calculation. We have a few other small investments.
How much do we need to save for retirement?
My husband says $2 million. I say $1 million. That’s a big discrepancy. I’m in favor of the smaller number because it means we can retire earlier, even though we’d have to live on less. He’s adamant that we need to save $2 million for retirement because if our portfolio performs poorly, we’ll be screwed with anything less.
How much will you spend in retirement?
The answer lies in how much you project your retirement expenses to be and how lavishly you want to live in retirement. Are you willing to put in a few more years of work in order to live more comfortably later on?
I’ve heard you can base your monthly retirement expenses on how much you currently spend, minus some if you will have paid off your mortgage and be living rent free. Or you can go the harder but more thorough route and estimate your monthly expenses in retirement. If you do the latter, the big question is how much heath care will cost. Will you purchase a long term care policy? Will you get it free through your former employer? Will you rely on Medicare?
Getting back to revealing our net worth…
When I think about my net worth, it brings up a lot of difficult questions. Which is why I shy away from thinking about it. Revealing my net worth to you will force me to face – and answer – a lot of these questions. Right now it feels safer to not have answers. Because there are no real answers, just estimates of how much we need to save, how our portfolio will perform, and how much we’ll actually spend in retirement.