Retiring at age 66 with a $900,000 Roth IRA and $2,200 in Social Security benefits is likely a reasonable plan for many retirees. The income you can reasonably expect from Roth withdrawals, along with Social Security benefits, is probably somewhat higher than the typical retiree’s expenses. You can expect to be able to pay your bills for as long as you live without taking undue risk of running out of money. However, this is not a guarantee. High inflation can erode the purchasing power of your Roth withdrawals or cause unexpected expenses, such as long-term care.
a financial advisor can help you assess your risk and create a comfortable and secure retirement financing plan.
Starting with the income side of your retirement budget, you could probably withdraw $36,000 from your retirement savings. Roth IRA During your first year of retirement, increase that amount at the annual rate of inflation each year thereafter. This is a prescription. 4% rulea guideline followed by many financial planners that suggests you can withdraw a certain percentage of your conservatively invested portfolio every year for about 30 years while minimizing the risk of running out of money. $900,000 times 4% is $36,000, so this is shown as the first annual withdrawal amount. For subsequent years, you will need to make assumptions about the portfolio’s growth and inflation rates in order to calculate appropriate withdrawals.
your social security is similarly easy, up to a point. One of the great benefits of Social Security is that it is inflation-adjusted, meaning that your benefits increase each year as your cost of living adjusts. One potential downside to relying on Social Security is that at some point in the future, currently estimated to be around 2035, you may need to: Reduce social security benefits by approximately 20%. There are many fixes available, so it is not certain that this will happen, but it is possible. For now, let’s assume your annual retirement income is $62,400. This includes $36,000 from the Roth and $26,400 from Social Security (equivalent to $2,200 per month).
A financial advisor can help you calculate your retirement income projections based on a variety of scenarios. Match with a financial advisor For free.
Retirement spending varies widely depending on factors such as your specific location, health status, and preferred lifestyle. Starting with the location, Annual income range for retirees to live in the US From $20,542 in Indiana to $36,023 in Alaska. Overall, retirement income averages $27,617, but this includes the District of Columbia, where retirees earn an average annual income of $43,080, a significant outlier.
Your expected annual retirement benefit of $62,400 is much higher than either of these numbers. As a result, you can probably expect to be able to afford a better-than-average life no matter where you live. However, if you need to reduce your retirement expenses, moving to a less expensive state or city can make a big difference in the lifestyle you can afford.
The economic impact of health conditions is also an important factor. your Medical expenses after retirement This can vary greatly depending on the individual’s health status. Retirees can spend more than 15% of their income on health-related expenses, if they are expensive. Maintain a healthy lifestyle and have regular health checkups to check your health status Nursing care insurance and health savings account Helps cushion the economic impact of age-related health.
Your lifestyle choices can make a huge difference in how affordable your retirement savings will be. Retirees typically spend some time between: 55% and 80% of pre-retirement income after they quit their jobs. This is a wide range, and personal preference can be the main factor in determining whether the range is at the high or low end.
In addition to location, your desire to travel and enjoy entertainment and recreational opportunities can also have a big impact on affordability. Many retirees travel less and participate in less entertainment and recreational activities as they age.
Consult a financial advisor About your post-retirement possibilities. An advisor can help you develop an efficient plan based on your goals and circumstances.
Your projected retirement income indicates that you can have a comfortable retirement in most circumstances. Your desired retirement location, health status, and lifestyle choices all have a huge impact on how affordable your lifestyle is. Wildcards inevitably arise in the form of potential future cuts in Social Security benefits or your own health status. However, in most situations, you will find that you can afford to retire at age 66 and enjoy a comfortable lifestyle.
A financial advisor can help you make wise choices when planning for retirement, balancing concerns such as location. Finding a financial advisor doesn’t have to be difficult. SmartAsset Free Tools matches you with up to three financial advisors in your area. You can meet with our advisor matches for free to decide which advisor is right for you. Are you ready to find an advisor to help you reach your financial goals? Get started now.
smart asset Retirement allowance calculation tool provides a quick and informative way to estimate how affordable your chosen lifestyle will be after you quit your job.
Keep an emergency fund on hand to cover unexpected expenses. Your emergency fund should be in an account that is highly liquid and doesn’t have the risk of wild swings like the stock market. The trade-off is that the value of liquid cash can be eroded by inflation. However, high-interest accounts allow you to earn compound interest. Compare savings accounts from these banks.
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