Plan for at least 20 Years of Retirement and the Income Needed to Support It

The retirement calculators don’t lie: starting to save for retirement later in life is a real battle. If you just started to save or invest in earnest at age 50 and hoped to retire early, well, that’s a difficult proposition.

To attain $1 million in your portfolio by age 60, a 50-year-old would need to invest $5,467 every month, and get an average rate of return of 8%. By the way, that rate of return is by no means guaranteed in today’s stock market. This is why financial advisors plead with their clients to start investing when they are young. For someone who is 30 years of age, that monthly savings number is only $671.

However, $1 million may have been an adequate amount when retiring in 1990 but not in 2022. This principle will permit $55,000 in withdrawals each year for a total of 18 years. Is this enough? For people living in higher-cost areas, that figure may not fully cover their living expenses, much less help pay for a grandchild’s education, travel, or other planned leisure activities and hobbies.

For How Long should you plan to Save for Retirement?

Finally, for the 60-year-old retiree starting with $1 million, that money will be depleted around age 78. For people who celebrate their 75th birthdays, the Centers for Disease Control and Prevention data show that they will live an average of 12-plus years, to 87. At a retirement age of 65, most people will live for close to 20 years. You should plan on having retirement savings to last at least that long.

All of this means that you’ll need other sources of income (real estate rentals or investments, a pension, or even part-time employment) or simply much greater assets by the time you stop working to ensure a stress-free retirement.

Isakov Planning Group is happy to discuss with you, as part of a free consultation, how to move your savings and investment strategy forward to meet your retirement goals.