While they were raising their three kids in North Caldwell, N.J., Ruth and Alex Karr found many ways to spend money that seemed preferable to investing it in retirement accounts.
"We always talked about putting money away," says Ruth Karr, 77. "But we always had something to spend it on -- the house, children, grandchildren. It took what we made to keep abreast."
So they never would have landed at Cedar Crest -- an upscale retirement community in Pompton Plains, N.J., with its own television studio, fitness complex and day spa -- if they hadn't inherited nearly $400,000 from Ruth's father about 20 years ago. The Karrs plunked down $150,000 to move into their two-bedroom ground-floor apartment here in 2003; they spend another $3,000 a month for maintenance, which comes from investments and Social Security. Inside a retirement community
"Until then we didn't have anything beyond a modest savings -- definitely less than $250,000, plus the house," says Ruth. "And I never thought I would get any money from my father. I guess I just never really expected to retire."
Financial advisers would cringe at the Karrs' story. Unforeseen inheritances aren't what clients are supposed to be planning for. Are Americans ready for retirement?
Given the financial state of many middle-class families, however, saving that 10% of income recommended by most planners is extraordinarily difficult. Yet, for those who dream of golden years like the Karrs', it can be an absolute necessity.
"People have no idea what they probably need to save," says Ron Kelemen, CFP, a fee-only financial planner with The H Group in Salem, Ore. "And I don't feel optimistic, especially when I read about what people have saved today."
Ready for the reality check? For every $1,000 a month that you want to collect in retirement, Kelemen says, you'll need to have put aside about $200,000, invested conservatively to get a 5% to 6% rate of return. So if you want to have an income of $72,000 a year -- $6,000 a month -- you should have about $1 million to $1.5 million saved in your retirement account.
And if $1.5 million sounds like a lot -- well, it ought to.
"That should be a wake-up call," says Kelemen. "Now I know a lot of people think their house is the ticket, and that they'll downsize. But I see a lot of McMansions going up. And I haven't seen all these giant inheritances. What I see instead are parents going through that money with higher health-care costs and,