Saving $1 million for retirement just doesn’t cut it anymore, at least for the average retiree in Denver and 146 other metro areas in the country, according to a new study from LendingTree.
Based on the average amount a retiree receives in Social Security payments, and their average annual spending, LendingTree determined how much a retiree would need to pull from a retirement portfolio to cover the spending gap, including taxes. That portfolio size was based on the 4% rule, which says no more than 4% should be removed from a retirement portfolio in a given year.
In metro Denver, the typical retiree makes $25,504 from Social Security a year, spends $58,992 a year, which implies the need to earn $75,245 before taxes. A retirement portfolio would need to provide $49,741 to meet that demand. Following the 4% rule, a Denver area retiree would need to set aside $1,243,532 at the time of retirement.
“Ultimately, each metro is unique and will have its own quirks that can make it more or less expensive,” said LendingTree senior economist Jacob Channel in comments contained in the report. “Anyone thinking about retiring in a given area should thoroughly research it before packing their bags and moving. Don’t let your preconceived notions or vague ideas about an area dictate whether you choose to live there.”
Out of the 384 metro areas that LendingTree examined, metro Denver had the 13th largest retirement portfolio requirement, between Washington, D.C., and Santa Maria, Calif. Areas, where people needed the most money to cover retirement expenses were San Francisco at $1.37 million, New York at $1.32 million, San Diego at $1.3 million, Honolulu at $1.29 million, and San Jose and Los Angeles in California at just over $1.27 million each.
For those who haven’t saved much for retirement, the best bargains were Johnstown, Pa., at $779,765; Cumberland, Md., at $802,988; and Danville, Ill., at $804,301.
As for retirees wanting to stay in Colorado, the study found that a retirement nest egg of $1.16 million was needed in Boulder; $1.08 million would work in Colorado Springs; $1.12 million in Fort Collins; $1.02 in Grand Junction, and $1.09 million in Greeley. The only metro in Colorado with a nest egg requirement below $1 million was Pueblo at $943,742.
The study looked at the average amount that a retiree spent in each area. One way to make do with smaller savings is to spend less or take more out of a smaller portfolio.
