First... get a million dollars...
Take workers with 401(k) accounts and similar retirement savings plans run by Vanguard. Plan members whose portfolios were invested 70% in stocks and 30% in bonds had average annual returns in the five years ended Dec. 31, 2018 of 5.6%. The S&P 500 grew at an 8.5% annual pace.
That's a reasonably representative period of time. It had down markets as well as up markets.
So in beefing up your retirement planning, let's use a 5.6% average annual rate of return for forecasting how your portfolio would behave going forward.
So first year you'll live on $40K, then the next year it'll be about $42,400, etc.
If you have a bad investment year then don't give yourself a "paycut" (4% of the lower balance). Withdraw the same amount you withdrew the prior year. Withdraw from the funds that are high (I invest in over 20 different growth funds in different sectors and different regions). If none of them are high withdraw from the "safe" funds (money markets, short term corp. bonds, LT corp. bonds, ST and LT treasury funds).
If you've paid off all your debts, including mortgage, and live on a budget, you can live off $40K the first year and $42K the next year. At least in low cost of living Alabama.
What $1 million? I’m so confused.
The Investors.com article uses a low value for the Social Security benefit for someone who is earning at that level by the time they retire.
The figure of over 5% return on a portfolio seems high with today’s interest rates. It may be based on history, but the economy has changed! I don’t expect more that 4% return.
Even at their somewhat low $30,000 for Social Security benefit, those who are married will have a spouse who can also draw half of their benefit even if the spouse has never worked. Thus, the annual benefit for a couple would be $45,000.
In general, if you are currently earning at the $100K level and if you hope to not draw down on your nest egg for your expected lifetime, then the rule of thumb is that you need to be closer to $2 million than $1 million by the time you retire.
Bump for later...
Our CFP says we can retire now, we are in our late 50’s but everyone on both sides of our families live to 95-100 with n o problem. Worried about running out of money and we have no kids to take care of us
We know another 2008 collapse is coming but worse so we continue working.
First... get a million dollars...
This is stupid. You withdraw a fixed percentage per year, or a slowly rising percentage if you want to draw down your capital rather than passing it on to your heirs. You do not withdraw a fixed dollar amount mindlessly. Live within your means, and you can live forever on $1M.
My wife and I both retired with a small pension each and Social Security benefits. We only had $350,000 in savings. We had almost $700,000 in retirement funds but lost half of it in the stock market crash in the fall of 2008 right before we were to retire. Everybody told us we couldn't retire when we did but we went with our own instincts and Plan B and did anyway.
We spent money from our savings to buy 30 acres of land and built a new house. We started a beef cattle operation to keep us busy. We had $100,000 of the original $350,000 left over and left it in the bank. I would never risk it in the stock market again, not at our age. We could never earn it back again if we lost it.
We have lived comfortably now for ten years on our retirement income cash flow, even managing to increase our savings account balance from $100,000 to $150,000 over that ten years.
We have absolutely no debt. We pay cash for everything. We both have VA medical care from our military service. Even with income and property taxes, insurance, utilities, fuel, some groceries and incidentals, we actually live better now than when we were working in our careers for a living and raising a family. On much less income.
We don't live the high life but we don't live frugally either. We want for nothing. My wife travels with her mom 3 or 4 times a year and splurges on the grandkids. We eat out seldom because we have our own meat, fruits and vegetables in the freezers from the farm. Our cars are not brand new but we maintain them and they will last for quite a few more years. Nobody out here in the country cares what kind of car you have. New cars are a waste of money because they depreciate in value so fast.
We figure we will continue to live comfortably for at least another 10-15 years and by then one or both of us will probably be in the family cemetery we have on our property.
One doesn't need some expensive investment advisor to tell you you need a million dollars or more in the bank to live on in retirement. Use your head and do what you think is right. It works for us.
The IRS will find ways to garnish all of it.
i am on the federal penitentiary retirement plan... when i am 72 i go into the IRS office and punch an agent. plead guilty and go to federal prison for three hots and a cot... not to mention golf and tennis and all the anal sex i can take.
i meant annual sex... darn autoconnect.
115,000 a year? Good grief. You definitely can live on 40-50 easily. If your house is not paid off then 70.
Life expectancy, for a 1935 birth, in 1935 was 59.9 for a male and 63.9 for a female. Life expectancy changes depending on whatever your age is at any given time other than birth. If one was born in 1900, average life expectancy at that time, was 49 for female and 47 for males...
https:https://www.infoplease.com/life-expectancy-birth-race-and-sex-1930-2010
(this builds a table and will probably slow your PC down for awhile) They use 65 as retirement age. That is no longer full retirement age for SS. It's scaled upward depending on date of birth, so the SS stats are kind whacked.
Max SS per month(if you've paid in max all the time) as of 2019 is:
$2,209 at age 62.
$2,861 at age 66.
$3,770 at age 70.
They also make a presumption that you want to keep the same income you had while working, of a 115k a year in retirement. That's misleading and their "example" probably can get by on less and maintain the same lifestyle.
I'd subtract, SSI and Medicare (7.15%). State and Fed. income tax (18%), Savings (15%), reduced travel and clothing expense.
Then add back State and Fed tax when you've determined that you're "needed" net income is $75K.
Now you're only needing about $88K gross, and about $24K of that is coming from SSI.
So, your $1 Million in retirement only needs to generate about $64K/yr, or about 6.4%.
Of course her opinion is that it is the constant use of my bass boat and the cost of all the various lures and boxes of Twinkies that are eating up our retirement...
Fortunately, for us, many years ago Rush talked about old people eating canned dog food... So we are getting by fine...
If you have a million dollars and it earns 6% a year, that’s $60,000 you can live on without having to touch the principal.
A retiree with a net worth of $1 million is in the "wealthiest 10%" of the nation. Still, using a conservative 4% safe withdrawal rate, the $1 million nest egg only generates a 30-year annual income of $40,000 (plus inflation). Social Security should supplement this by about $30,000/yr, giving the retiree an annual income in the $70K range.
| Net Worth Percentile |
Net Worth |
| 10.0% | -$950 |
| 20.0% | $4,800 |
| 30.0% | $18,900 |
| 40.0% | $49,100 |
| 50.0% | $97,300 |
| 60.0% | $170,000 |
| 70.0% | $279,000 |
| 80.0% | $499,350 |
| 90.0% | $1,186,570 |
| 91.0% | $1,317,500 |
| 92.0% | $1,445,700 |
| 93.0% | $1,686,700 |
| 94.0% | $2,044,300 |
| 95.0% | $2,387,250 |
| 96.0% | $2,838,000 |
| 97.0% | $3,693,600 |
| 98.0% | $5,794,500 |
| 99.0% | $10,400,000 |
-PJ