Retirement can be scary. You save up for it your whole life, working hard and investing it for your future. Then that day finally comes and you start pulling out that hard earned money.
How do you decide how much money you pull out of these accounts? In general, a safe withdrawal rate is 3%. So, for example, if you accumulated $1,000,000 in savings between your 401k and your IRA then you would pull out $30,000 per year. It that is not enough to live on, then you can add in a pension if you have one, Social Security if you qualify or may need to work part-time.
Your paycheck in retirement can come from multiple sources. It depends just how much you need to live. The best way to play is to figure out what your monthly budget will be to meet your living expenses. If you need $4,000 each month and you get $2,000 from Social Security then you need $2,000 more. If you had saved the $1,000,000 and are going to pull the 3%, that would give you an additional $2,500 each month. That leaves $500 extra each month, right? Unfortunately, not, you need to also consider taxes.
It can get confusing and overwhelming quickly when it comes to your retirement. If you would like help with a retirement projection to determine how much you need to be saving to have enough in retirement, please contact our office to schedule a meeting.
Any opinions are those of Nicole Middendorf and not necessarily those of Raymond James. The hypothetical examples are for illustration purposes only.