How Much is Enough?


At some point, you may ask yourself the question, “Do I have enough to take care of my spouse and myself for the rest of our lives?” This is a common question, because regardless of your net worth, the future is unknown. You think about the “what ifs”. What if you get sick and have high health care bills? What if you live to 105? What if the stock market doesn’t provide the level of growth that you have assumed? Life is full of these questions. You should consider a range of potential outcomes to help you guesstimate (yes, there is an element of guessing) what you MAY need during your lifetime. If the result is less than your current net worth, then most likely, you “have enough”.

The great benefit of this analysis, assuming you “have enough”, is that it allows you to think more deeply about your legacy and how you can provide a meaningful impact sooner rather than later. This impact can be for your children or grandchildren or other family members, for your local community, or even for the world. Whether it is sending a grandchild to a slightly better school, enabling a child to start a business, or supporting those charitable organizations making a difference in your community, having comfort that you “have enough” allows you to think about what you cherish most and the impact you want to have NOW on others.

So how do you calculate “enough”? In actuality, this is a complex question that requires complicated and individualized analysis to provide a range of possible outcomes. However, if you want a simple “ballpark” answer, follow these steps.

  1. Determine how much you need per year. If you don’t know what you are currently spending, now is a good time to write down your various expenses by category and think about how these categories may change later in life. For example, education expenses for your children should decline, travel expenses may increase after retirement but decrease at a certain age, and inevitably health care expenses may increase later in life. Simply put, your current expenses are your current income received minus your current savings.   Let’s assume you need $100,000 per year.
  2. Determine how many years you may need that amount (roughly how long you think you will be here on Earth). The number of years that you are estimating is a personal preference, but I generally get nervous when someone is basing their estimate on living to age 95 or earlier. Let’s assume you need $100,000 per year for 30 years.
  3. Multiply the 2 numbers together. Again, this is very much a “ballpark” and does not directly factor in the growth of your expenses (yes, generally your expenses will increase over time due to inflation) and it also does not factor in the growth of your investment assets. Presumably the rate of increase of your expenses will be less than the growth of your investment assets, which can provide a slight cushion for the future “what ifs”. The other thing to consider is whether or not you are currently in your working years. The above example assumes you have a constant level of net expenses (income less expenses). Adjustments should be made to account for varying levels of income and/or expenses.

Using the above example, you need $3,000,000. If you currently have $5 million, this implies you may be able to afford to use part of the $2 million excess to make an impact now. If you want to be more conservative and build in a cushion, say $50,000 extra per year, then you will need $4.5 million. This still leaves $500,000 to potentially provide an impact during your lifetime.

Again, this is oversimplified, but it can help you begin to feel comfortable about whether or not you “have enough”. To gain more confidence in your decision, you should talk to your financial advisor and run various projections based on your unique situation. You should review and update the projections periodically. This process can highlight what is possible and potentially allow you to make an impact DURING your lifetime.

Andy Avera started Avera Wealth Advisors in Fall 2017 in order to provide individualized, holistic, and proactive financial planning for individuals and families.  Andy has over 17 years of experience in the Atlanta area providing comprehensive wealth management for high-net-worth clients.

2146 Roswell Road, Suite 1081009

Marietta, GA 30062

Tel: 770-722-5074

Fax: 877-202-2230