Can I retire on $500,000 plus social security?

Can I retire on 500k plus Social Security? As we have established, retiring on $500k is entirely feasible . With the addition of Social Security benefits, this becomes even more of a possibility. In retirement, Social Security benefits can provide an additional $1,900 per month, on average.

How much money will you need for retirement which answer is the most correct answer?

Many experts maintain that retirement income should be about 80% of a couple's final pre-retirement annual earnings . Fidelity Investments recommends that you should save 10 times your annual income by age 67.

How much money should a 70 year old have to retire?

How Much Should a 70-Year-Old Have in Savings? Financial experts generally recommend saving anywhere from $1 million to $2 million for retirement. If you consider an average retirement savings of $426,000 for those in the 65 to 74-year-old range, the numbers obviously don't match up.

At what age can you retire with $1 million dollars?

Retiring at 65 with $1 million is entirely possible. Suppose you need your retirement savings to last for 15 years. Using this figure, your $1 million would provide you with just over $66,000 annually. Should you need it to last a bit longer, say 25 years, you will have $40,000 a year to play with.

Can I retire at 62 with $400,000 in 401k?

If you have $400,000 in the bank you can retire early at age 62, but it will be tight . The good news is that if you can keep working for just five more years, you are on track for a potentially quite comfortable retirement by full retirement age.

What percentage of retirees have $2 million dollars?

According to EBRI estimates based on the latest Federal Reserve Survey of Consumer Finances, 3.2% of retirees have over $1 million in their retirement accounts, while just 0.1% have $5 million or more.

How much money do you need to retire with $100,000 a year income?

To cut to the chase, if you want your interest to earn $50,000, $70,000 or $100,000 per year, you'll need to have approximately $1.25 million to $2.5 million in savings or retirement accounts. If you're aiming for somewhere in the middle, like $70,000, you'd want to have $1.75 million saved.

Do most people retire with enough money?

The average retirement savings for all families is $333,940 , according to the 2022 Survey of Consumer Finances. The median retirement savings for all families is $87,000.

How much money do you need to retire with $80,000 a year income?

Sticking with the $80,000 example, that means you need an additional $50,000 in income a year. Assuming an inflation rate of 4% and a conservative after-tax rate of return of 5%, you should aim for a savings target of $1.3 million to fund a 30-year retirement that begins at age 67.

What does the average American retire with?

Data from the Federal Reserve's most recent Survey of Consumer Finances (2022) indicates the median retirement savings account balance for all U.S. families stands at $87,000 .

How many people have $1,000,000 in savings?

Employee Benefit Research Institute (EBRI) data estimates that just 3.2% of Americans have $1 million or more in their retirement accounts. Here's how much most Americans have saved and what you can do to boost your retirement savings. Don't miss out: Click to see our list of best high-yield savings accounts.

How long will $200,000 last in retirement?

Summary. Retiring with $200,000 in savings will roughly equate to $15,000 annual income across 20 years .

Can I live off the interest of 1 million dollars?

Once you have $1 million in assets, you can look seriously at living entirely off the returns of a portfolio . After all, the S&P 500 alone averages 10% returns per year. Setting aside taxes and down-year investment portfolio management, a $1 million index fund could provide $100,000 annually.

How many people have $3000000 in savings?

There are estimated to be a little over 8 million households in the US with a net worth of $3 million or more.

What percentage of retirees have $3 million dollars?

Specifically, those with over $1 million in retirement accounts are in the top 3% of retirees. The Employee Benefit Research Institute (EBRI) estimates that 3.2% of retirees have over $1 million, and a mere 0.1% have $5 million or more, based on data from the Federal Reserve Survey of Consumer Finances.

Beyond the 4% Rule: How Much Can You Spend in Retirement? (2024)

Retirement Income

February 27, 2023 Rob WilliamsChris Kawashima

How much can you spend in retirement without running out of money? The 4% rule is a common rule of thumb, but we think you can do better by finding your personalized spending rate.

You've worked hard to save for retirement, and now you're ready to turn your savings into a paycheck. But how much can you afford to withdraw from savings and spend? If you spend too much, you risk being left with a shortfall later in retirement. But if you spend too little, you may not enjoy the retirement you envisioned.

One frequently used rule of thumb for retirement spending is known as the 4% rule. It's relatively simple: You add up all of your investments, and withdraw 4% of that total during your first year of retirement. In subsequent years, you adjust the dollar amount you withdraw to account for inflation. By following this formula, you should have a very high probability of not outliving your money during a 30-year retirement, according to the rule.

For example, let's say your portfolio at retirement totals $1 million. You would withdraw $40,000 in your first year of retirement. If the cost of living rises 2% that year, you would give yourself a 2% raise the following year, withdrawing $40,800, and so on for the next 30 years.

The 4% rule assumes you withdraw the same amount from your portfolio every year, adjusted for inflation

Source: Schwab Center for Financial Research.

Assumes an initial portfolio value of $1 million. Withdrawals increase annually by 2%.The example is hypothetical and provided for illustrative purposes only.

While the 4% rule is a reasonable place to start, it doesn't fit every investor's situation. A few caveats:

It's a rigid rule. The 4% rule assumes you increase your spending every year by the rate of inflation—not on how your portfolio performed—which can be a challenge for some investors. It also assumes you never have years where you spend more, or less, than the inflation increase. This isn't how most people spend in retirement. Expenses may change from one year to the next, and the amount you spend may change throughout retirement.
It applies to a specific portfolio composition. The rule applies to a hypothetical portfolio invested 50% in stocks and 50% in bonds. Your actual portfolio composition may differ, and you may change your investments over time during your retirement. We generally suggest that you diversify your portfolio across a wide range of asset classes and types of stocks and bonds, and that you reduce your exposure to stocks as you transition through retirement.
It uses historical market returns. Analysis by Charles Schwab Investment Advisory, Inc. (CSIA) projects that market returns for stocks and bonds over the next decade are likely to be below long-term historical averages. Using historical market returns to calculate a sustainable withdrawal rate could result in a withdrawal rate that is too high.
It assumes a 30-year time horizon. Depending on your age, 30 years may not be needed or likely. According to Social Security Administration (SSA) estimates, the average remaining life expectancy of people turning 65 today is less than 30 years. We believe that retirees should plan for a long retirement. The risk of running out of money is an important risk to manage. But, if you're already retired or older than 65, your planning time horizon may be different. The 4% rule, in other words, may not suit your situation.
It includes a very high level of confidence that your portfolio will last for a 30-year period. The rule uses a very high likelihood (close to 100%, in historical scenarios) that the portfolio would have lasted for a 30-year time period. In other words, it assumes that in nearly every scenario the hypothetical portfolio would not have ended with a negative balance. This may sound great in theory, but it means that you have to spend less in retirement to achieve that level of safety. By staying flexible and revisiting your spending rate annually, you may not need to target such a high confidence level.
It doesn't include taxes or investment fees. The rule guides how much to withdraw from your portfolio each year and assumes that taxes or fees, if any, are an expense that you pay out of the money withdrawn. If you withdraw $40,000, and have $5,000 in taxes and fees at year-end, that's paid from the $40,000 withdrawn.

Beyond the 4% rule

However you slice it, the biggest mistake you can make with the 4% rule is thinking you have to follow it to the letter. It can be used as a starting point—and a basic guideline to help you save for retirement. If you want $40,000 from your portfolio in the first year of a 30-year retirement, increasing annually with inflation, with high confidence your savings will last, using the 4% rule would require you to have $1 million dollars in retirement. But after that, we suggest adopting a personalized spending rate, based on your situation, investments, and risk tolerance, and then regularly updating it. Further, our research suggests that, on average, spending decreases in retirement. It doesn't stay constant (adjusted for inflation) as suggested by the 4% rule.

How do you determine your personalized spending rate? Start by asking yourself these questions:

1. How long do you want to plan for?

Obviously you don't know exactly how long you'll live, and it's not a question that many people want to ponder too deeply. But to get a general idea, you should carefully consider your health and life expectancy, using data from the Social Security Administration and your family history. Also consider your tolerance for managing the risk of outliving your assets, access to other resources if you draw down your portfolio (for example, Social Security, a pension, or annuities), and other factors. Thisonline calculatorcan help you determineyour planning horizon.

2. How will you invest your portfolio?

Stocks in retirement portfolios provide potential for future growth, to help support spending needs later in retirement. Cash and bonds, on the other hand, can add stability and can be used to fund spending needs early in retirement. Each investment serves its own role, so a good mix of all three—stocks, bonds and cash—is important. We find that asset allocation has a relatively small impact on your first-year sustainable withdrawal amount, unless you have a very conservative allocation and long retirement period. However, asset allocation can have a significant impact on the portfolio's ending asset balance. In other words, a more aggressive asset allocation may have the potential to grow more over time, but the downside is that the "bad" years can be worse than with a more conservative allocation.

Asset allocation can have a big impact on a portfolio's ending balance

Source: Schwab Center for Financial Research.

Assumes a constant asset allocation, a 75% confidence level, and withdrawals growing by a constant 2.53% over 30 years. Assumes a starting balance of $1 million. Confidence level is defined as the number of times the portfolio ended with a balance greater than zero. See disclosures for additional disclosures on allocations and capital market estimates.The example is hypothetical and provided for illustrative purposes only. It is not intended to represent a specific investment product and the example does not reflect the effects of taxes or fees.

Remember, choosing an appropriate mix of investments may not be just a mathematical decision. Research shows that the pain of losses exceeds the pleasure from gains, and this feeling can be amplified in retirement. Picking an allocation you're comfortable with, especially in the event of a bear market, not just the one with the greatest possibility to increase the potential ending asset balance, is important.

3. How confident do you want to be that your money will last?

Think of a confidence level as the percentage of times in which the hypothetical portfolio did not run out of money, based on a variety of assumptions and projections regarding potential future market performance. For example, a 90% confidence level means that, after projecting 1,000 scenarios using varying returns for stocks and bonds, 900 of the hypothetical portfolios were left with money at the end of the designated time period—anywhere from one cent to an amount more than the portfolio started with.

We think aiming for a 75% to 90% confidence level is appropriate for most people, and sets a more comfortable spending limit, if you're able to remain flexible and adjust if needed. Targeting a 90% confidence level means you will be spending less in retirement, with the trade-off that you are less likely to run out of money. If you regularly revisit your plan and are flexible if conditions change, 75% provides a reasonable confidence level between overspending and underspending.

4. Will you make changes if conditions change?

This is the most important issue, and one that trumps all of the issues above. The 4% rule, as we mentioned, is a rigid guideline, which assumes you won't change spending, change your investments, or make adjustments as conditions change. You aren't a math formula, and neither is your retirement spending. If you make simple changes during a down market, like lowering your spending on a vacation or reducing or cutting expenses you don't need, you can increase the likelihood that your money will last.

Putting it all together

After you've answered the above questions, you have a few options.

The table below shows our calculations, to give you an estimate of a sustainable initial withdrawal rate. Note that the table shows what you'd withdraw from your portfolio this year only. You would increase the amount by inflation each year thereafter—or ideally, re-review your spending plan based on the performance of your portfolio. (We suggest discussing a comprehensive retirement plan with an advisor, who can help you tailor your personalized withdrawal rate. Then update that plan regularly.)

We assume that investors want the highest reasonable withdrawal rate, but not so high that your retirement savings will run short. In the table, we've highlighted the maximum and minimum suggested first-year sustainable withdrawal rates based on different time horizons. Then, we matched those time horizons with a general suggested asset allocation mix for that time period. For example, if you are planning on needing retirement withdrawals for 20 years, we suggest a moderately conservative asset allocation and an initial withdrawal rate between 5.4% and 5.9%.

The table is based on projections using future 10-year projected portfolio returns and volatility, updated annually by Charles Schwab Investment Advisor, Inc. (CSIA). The same annually updated projected returns are used in retirement saving and spending planning tools and calculators at Schwab.

Choose a withdrawal rate based on your time horizon, allocation, and confidence level

Source: Schwab Center for Financial Research, using Charles Schwab Investment Advisory's (CSIA) 2023 10-year long-term return estimates and volatility for large-cap stocks, mid/small-cap stocks, international stocks, bonds and cash investments.

CSIA updates its return estimates annually, and withdrawal rates are updated accordingly. See the disclosures below for a summary of the Conservative, Moderately Conservative, Moderate, and Moderately Aggressive asset allocations.The Moderately Aggressive allocation isnot our suggested asset allocation for any of the time horizons we use in the example.The example is hypothetical and provided for illustrative purposes only. It is not intended to represent a specific investment product and the example does not reflect the effects of taxes or fees.Past performance is no guarantee of future results.

Again, these spending rates assume that you will follow that spending rule throughout the rest of your retirement and not make future changes in your spending plan. In reality, we suggest you review your spending rate at least annually.

Schwab's suggested allocations and withdrawal rate

Planning time horizon
Asset allocation
Initial withdrawal rate
(for a 75% to 90% confidence model)

Planning time horizon

30-years
>
Asset allocation

Moderate
>
Initial withdrawal rate
(for a 75% to 90% confidence model)

3.8% to 4.4%
>
- Planning time horizon
  
  20-years
  >
- Asset allocation
  
  Moderately Conservative
  >
  See Also
  Saving Just $300 a Month Could Make You a Retirement Millionaire, but Only If You Follow These 2 Rules | The Motley Fool
- Initial withdrawal rate
  (for a 75% to 90% confidence model)
  
  5.4% to 5.9%
  >
  - Planning time horizon
    
    10-years
    >
  - Asset allocation
    
    Conservative
    >
  - Initial withdrawal rate
    (for a 75% to 90% confidence model)
    
    10.2% to 10.6%
    >
Source
Schwab Center for Financial Research. Initial withdrawal rates are based on scenario analysis using CSIA's 2023 10-year long-term return estimates. They are updated annually, based on interest rates and other factors, and withdrawal rates are updated accordingly.¹Moderately Aggressive asset allocation was removed as it is generally not recommended for a 30-year time period.The example is provided for illustrative purposes.

Here are some additional items to keep in mind:
- If you are regularly spending above the rate indicated by the 75% confidence level (as shown in the first table), we suggest spending less.
- If you're subject to required minimum distributions, consider those as part of your withdrawal amount.
- Be sure to factor in Social Security, a pension, annuity income, or other non-portfolio income when determining your annual spending. This analysis estimates the amount you can withdraw from your investable portfolio based on your time horizon and desired confidence, not total spending using all sources of income. For example, if you need $50,000 annually but receive $10,000 from Social Security, you don't need to withdraw the whole $50,000 from your portfolio—just the $40,000 difference.
- Rather than just interest and dividends, a balanced portfolio should also generate capital gains. We suggest using all sources of portfolio income to support spending. Investing primarily for interest and dividends may inadvertently skew your portfolio away from your desired asset allocation, and may not deliver the combination of stability and growth required to help your portfolio last.
- The projections above and spending rates are before asset management fees, if any, or taxes. Pay those from the gross amount after taking withdrawals.
Stay flexible—nothing ever goes exactly as planned

Our analysis—as well as the original 4% rule—assumes that you increase your spending amount by the rate of inflation each year regardless of market performance. However, life isn't so predictable. Remember, stay flexible, and evaluate your plan annually or when significant life events occur. If the market performs poorly, you may not be comfortable increasing your spending at all. If the market does well, you may be more inclined to spend more on some "nice to haves," medical expenses, or on leaving a legacy.

Bottom line

The transition from saving to spending from your portfolio can be difficult. There will never be a single "right" answer to how much you can withdraw from your portfolio in retirement. What's important is to have a plan and a general guideline for spending—and then monitor and adjust, based on your circ*mstances, as necessary. The goal, after all, isn't to worry about complicated calculations about spending. It's to enjoy your retirement.

¹The tables show sustainable initial withdrawal rates calculated by simulating 1,000 random scenarios using different confidence levels (i.e., probability of success), time horizons and asset allocation. "Confidence" is calculated as the percentage of times where the portfolio's ending balance was greater than $0. The initial withdrawal amount, in dollars, is then increased by a 2.53% rate of inflation annually. Returns and withdrawals are calculated before taxes and fees. The moderately aggressive allocation is left out of the summary table, because it is not our suggested asset allocation for any of the time horizons we use as an example. For illustration only.

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Beyond the 4% Rule: How Much Can You Spend in Retirement? (2024)

The 4% rule assumes you withdraw the same amount from your portfolio every year, adjusted for inflation

Beyond the 4% rule

1. How long do you want to plan for?

2. How will you invest your portfolio?

Asset allocation can have a big impact on a portfolio's ending balance

3. How confident do you want to be that your money will last?

4. Will you make changes if conditions change?

Putting it all together

Choose a withdrawal rate based on your time horizon, allocation, and confidence level

Schwab's suggested allocations and withdrawal rate

Here are some additional items to keep in mind:

Stay flexible—nothing ever goes exactly as planned

Bottom line

5-Step Tax-Smart Retirement Income Plan

Build Tax-Free Savings Using Roth Conversions

Timing Matters: Understanding Sequence-of-Returns Risk

Related topics

FAQs

Can I retire on $500,000 plus social security? ›

How many people have $1,000,000 in savings? ›