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How Long Will Your $1 Million Last In Retirement?
IBD ^ | 10/29/2019 | Paul Katzeff

Posted on 10/29/2019 8:32:13 AM PDT by SeekAndFind

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Congratulations! Your retirement planning paid off. You built a $1 million retirement nest egg. But how long will $1 million last in retirement?

Retirement Planning To Make Your $1 Million Last

Let's say you're 65 years old and earn $115,000 a year. That's a decent annual income, but it's no king's ransom. It's enough to let you sock away good chunks of money each year. But it's not so high that it trips over income limits when it comes to saving in a retirement plan such as a 401(k).

The simple arithmetic answer to the how-long-will-it-last retirement planning question is that your savings would last less than nine years. That's how many years in a row you can subtract $115,000 from $1 million.

And less than nine years is not very long if you're healthy and have a normal life expectancy.

The average American's life expectancy is now 78.6 years, as of 2017, according to the U.S. Centers for Disease Control (CDC). But for a 65 year old, it's closer to 20 additional years, according to CDC data. So, if you retire at age 65 and you're typical, you can expect to live to nearly 85. Nine years of money does not cut it.

Put Your Retirement Nest Egg To Work

But your $1 million nest egg can last longer. Here's how.

First, the simple arithmetic calculation of dividing $1 million by $115,000 assumes that your nest egg would not grow over time.

In fact, it certainly would grow, given enough time. The stock market has rebounded from setbacks over time.

So how have real investors fared in recent years?

(Excerpt) Read more at investors.com ...


TOPICS: Business/Economy; Society
KEYWORDS: 401k; clickbait; ira; pension; retirement
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To: SeekAndFind
I object to their transition from $115K working salary to an equivalent retirement income.

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%.

81 posted on 10/29/2019 11:05:20 AM PDT by G Larry (There is no great virtue in bargaining with the Devil)
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To: TangledUpInBlue
My retirement guy gets asked this all the time. Actually, he gets asked “How much do we need to retire?” and his answer is always the same.... “How much do you spend?”

I find this annoying. What you spend isn't the major problem. The major problem is that you can't count on money to remain of the same value with each passing year.

Since that silly fool got elected in 2008, the price of most of what I buy, doubled. Virtually everything I purchase in my day to day life costs twice what it did in 2008.

What good does it do you if you calculate you will need X dollars per year for 20 years when the real life costs of everything become 2X?

I don't see many people discussing the problem of rampant inflation of money, and no matter how you calculate your retirement, when the cost of things double or triple, most people will not be able to weather it without serious reductions in their standard of living.

82 posted on 10/29/2019 11:11:19 AM PDT by DiogenesLamp ("of parents owing allegiance to no oither sovereignty.")
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To: napscoordinator

We do Lake Front every year up the mountains.This year our place sleeps 24.Lot’s of FUN.
My husband retired,we had too many bills so we told the kids that the first one who bought a house with an in-law-swite that we liked we would move in.Sold our house-got full price,kept our shore place and we have fun.


83 posted on 10/29/2019 11:13:25 AM PDT by fatima (Free Hugs Today :))
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To: SeekAndFind
Based of 60-years with my wife, the last 20 in retirement, it has depended on how the casino slots in Las Vegas and Maryland are dribbling pay-offs out...

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...

84 posted on 10/29/2019 11:14:11 AM PDT by SuperLuminal (Where is Sam Adams now that we desperately need him)
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To: fatima

suite


85 posted on 10/29/2019 11:15:04 AM PDT by fatima (Free Hugs Today :))
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To: DiogenesLamp

Any good projection should take into account the value of inflation. Your point is valid, but to ignore it while doing a forecast is folly.

If you assume three things in retirement: 1) That your mortgage will be gone, 2) that your grocery bill will be significantly less and 3) that your property taxes will be significantly less,

then it is reasonable to assume that your costs of living will be a lot less. Yes, you will factor in Healthcare costs unless you are very lucky/healthy. But those are the major costs that I mention above and I can tell you, when I retire and we leave New Jersey, those three items will be reduced by almost 100% compared to what they are now.

That’s a big deal.


86 posted on 10/29/2019 11:28:46 AM PDT by TangledUpInBlue
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To: Don W
I was using the author’s chosen income level

The author's strawman is 65 years old and earns $115,000 per year.
That is not elitist by any stretch.
87 posted on 10/29/2019 11:30:22 AM PDT by oh8eleven (RVN '67-'68)
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To: PA2SK

“Sustainable withdraw rate is 3% to 4% a year and you should be mostly in bonds.”

This withdrawal rate may be appropriate if you are “mostly” in bonds, but that plus SS won’t generate enough income out of $1,000,000 for most people used to a $115,000 pre-retirement income to live on comfortably in retirement.


88 posted on 10/29/2019 11:35:48 AM PDT by riverdawg
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To: Be Free
Donald Trump says "You're welcome!" & "K.A.G.!"

Indeed, I bought the S&P in 2016 at $195 per share and it's now over $300. My original home (without mortgage) has almost doubled in value since I moved and is returning nice rental income. I bought a 2nd home in Florida at the bottom of the market and that has doubled. Other stock purchases concentrated on dividend payers which ring the cash register every quarter. K. A. G.!

89 posted on 10/29/2019 11:46:21 AM PDT by DeFault User
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To: oh8eleven
Our friend's strawman was supposed to be some sort of average Joe. At least that was the way I read the article. I know folks that retired with a full pension from the military and are working full time skilled labor jobs that don't make that kind of money.

I suppose I must live in some impoverished backwater where $70K is a pretty good living.

Nice to know there are folks making that kind of money. To me that's the upper end of what could be considered any sort of "average". BTW, according to the WIKI article HERE, (which uses US gov't figures) over 90 % of American's income is UNDER 100K, so while "elitist" might be a trigger word for some, it's not wholly inaccurate.

90 posted on 10/29/2019 11:57:21 AM PDT by Don W (When blacks riot, neighbourhoods and cities burn. When whites riot, nations and continents burn.)
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To: fatima

That is so great. Too many people make excuses not to have family outings and then wonder why families are falling apart. So glad you make family gatherings important. Big dividends in that.


91 posted on 10/29/2019 12:14:42 PM PDT by napscoordinator (Trump/Hunter, jr for President/Vice President 2016)
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To: SeekAndFind

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.


92 posted on 10/29/2019 12:16:28 PM PDT by dfwgator (Endut! Hoch Hech!)
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To: hollywood
Just don't go to Vegas and gamble away the "Nest Egg"

“Don’t use that word, it’s off-limits to you. Only those in this house who understand it might use it. And don’t use any part of it either. Don’t use nest, don’t use egg. You’re out in the forest, you can point. The bird lives in a round stick. And you have ‘things’ over easy with toast.”

93 posted on 10/29/2019 12:19:16 PM PDT by dfwgator (Endut! Hoch Hech!)
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To: Don W
while "elitist" might be a trigger word for some
I think our differences are a result of what each of us considers elitist. So be it ...
94 posted on 10/29/2019 12:26:44 PM PDT by oh8eleven (RVN '67-'68)
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To: SeekAndFind
To give another perspective, here is a table from the following web article Nine Charts about Wealth Inequality in America (Updated). Data is from 2016 (reported in October 2017).

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

95 posted on 10/29/2019 12:37:24 PM PDT by Political Junkie Too (Freedom of the press is the People's right to publish, not CNN's right to the 1st question.)
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