Can You Retire on 00k? Heres How to Do It

Is $500,000 enough to retire on? The answer depends on several factors, but it’s certainly possible to retire on $500k comfortably.

Can you retire with 500 000 in savings well the answer is yes but the question is how exactly is that going to look in terms of being able to meet all your needs and this depends on a number of factors so that’s how much do you spend what other types of income do you have maybe social security or a pension and then other aspects of your finances so let’s walk through

An example to see exactly how it might work with somebody who’s going to retire with 500 000 in savings one of the most important pieces of any retirement income plan is your spending level so the less you spend each month obviously the easier it is to make your retirement work it means you can retire earlier or you can retire with less in savings you have more of

A buffer it’s just easier to absorb surprises when you keep your spending lower but your number is your number so whatever it happens to be you can customize it we’re going to walk through a basic example here with some national averages more or less and then again you can kind of overlay this example and use your own numbers for your own situation so i’ve got

Some statistics here says the average social security payment is about fifteen hundred dollars per month uh ninety percent of people over age 65 get social security and for about half of those households social security is roughly half of their household income so social security is a big deal that’s going to be a big factor in what you get some of you will get

More than that 1500 and some of you will get less than that 1500 it depends on your earnings history and a couple of other factors throughout your life leading up to retirement if you’re fortunate enough to be a higher earner throughout your life you might get as much as 34 000 per year currently and by the way if you happen to delay your benefits or wait until

After your full retirement age you can really maximize what you get from social security but let’s go with again some pretty basic numbers here for an easy example i’m going to assume you have that five hundred thousand dollars in a retirement account you’re getting two thousand a month from social security you get another pension a small pension six thousand

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Dollars per year 500 bucks a month so with your social security plus your pension that’s 30 000 a year of income so how much do you need to spend that’s the question well i’m going again with a national median income is about 52 000 so let’s let’s go with that you might need more you might need less again you can overlay this example onto your finances and and

Figure out those details but if that’s the case we’re at 30 000 of income we need 52 000 of spending so where’s that money going to come from it’s going to come out of those retirement assets if you choose to retire right now a lot of people wonder if they can just live off the income and put that in air quotes live off the income of their investments and that is

A very nice thought it would be a wonderful thing to do and it was a reality and maybe decades passed when interest rates were different and a lot of things were different uh currently you know the reality is for most people especially with about 500 000 in savings is that you’re not going to live off the interest what you would be doing instead is spending down

Your assets so it’s critical to make sure that we do that at a rate that does not have you run out of money before the end of your life of course we need to make some assumptions about when the end of your life is we’ve got life expectancy we can look at your your family and that sort of thing but the point is we’re probably going to actually be withdrawing and

Drawing down your account balance over time so how much can you pull out of your assets how much is safe to withdraw from what you have sucked away that 500 000 nest egg for example well it’s a very difficult question and it depends on a lot of things and it requires predicting the future but there is a rule of thumb out there can kind of give us a ballpark idea

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It’s not perfect by any means but there is something called the four percent rule that tells us you can withdraw roughly four percent of your account balance each year your starting account balance each year and you can adjust that with inflation so it increases as prices rise and that should last and i say should because we don’t know if it will uh should last

For about a 25 year retirement so the idea being that you can take four percent of the starting assets each year and spend that so four percent of five hundred thousand is twenty thousand dollars per year might not sound like a lot based on your five hundred thousand dollar nest egg but again this is an increasing amount so in the following year it’s going to be

More than twenty thousand dollars and in order to make that work where you can keep increasing the the monthly uh and the annual income you need to start somewhat small now in our example we said you needed twenty two thousand dollars per year to close that gap and so here we’ve got twenty thousand that we can pull out using the four percent rule can you pull out

More yes you can then you’re starting to get into what we might call less safe territory is that a good thing or a bad thing we’ll have to kind of look at the details but this is a way to estimate exactly how it might work for you based on what you have okay so far we’re two thousand dollars per year short and we also have to deal with the tax issue and i don’t

Say all of this to take the wind out of your sales but these are the types of things that you need to know about it’s critical to be aware of all of this before you go into it so that there are no surprises when the day comes that you want to retire so what can you do to fix that shortfall well there are a couple of different strategies and most people think first

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Of just cutting expenses and i’ll spend two thousand dollars per year less if that’s the case and if that’s something you can easily do that’s perfect that’s a great way to make it work and trimming your spending is a really powerful way to fix your retirement but if you do a couple of other things you can also get some pretty good results one of them happens to

Be just working longer might not sound appealing but here’s what happens when you do that number one is you shorten the number of years that you need to fund in your retirement between your retirement date and your life expectancy the other thing is you can use those working years to add to your retirement savings so you can put more money away so you have more

To draw out later uh you might also be improving your social security benefits so especially if you’re in your highest earning years right now you’re kind of bumping up what you might get each month from social security that makes a nice difference as well as you might wait an extra year or two to claim your social security benefits and that can potentially give

You another increase from your delayed retirement credits so a lot of different things can work together to really help you out may not be the first choice you have but these are the things you need to look at these are the things you need to know about as you make that plan so i hope this is really helpful it is absolutely possible to retire with 500 000 if you

Have two people getting social security benefits i mean that just makes it that much easier but you know take this example and again make it fit for your situation and put those pieces together what is your income what is your pension what is the gap that you need to fill and how is

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Can You Retire on $500k? Here's How to Do It By Approach Financial