How Much Retirement Will $400,000 Buy Me?

How Much Retirement Will $400,000 Buy Me?
SmartAsset: How long will $400,000 last in retirement?

SmartAsset: How long will $400,000 last in retirement?

Data from the Federal Reserve shows that average savings In the United States the retirement age is only $255,200. So if you’ve found yourself $400,000 in assets at retirement age, congratulations! You are doing much better than average. But how long will your money last? The answer will depend on your investment allocation, spending habits, and other income streams. Here are some tools to help you determine your available assets and desired expenses so you can live the retirement you want on $400,000.

a financial consultant They can help you create a financial plan for your retirement needs and goals.

How to determine your assets and available income streams

Knowing what is available to you will have a huge impact on how long you can reasonably expect your money to last. Every source of income you can have in retirement will reduce the amount you need withdraw from your wallet. Sources of potential income could include:

In addition to the $400,000 in retirement accounts, you may also have assets that can be used to supplement your income at a later date. Assets can include:

  • The equity you have in your home, which can be refinanced to reduce your mortgage or sold to purchase a smaller home in a lower cost of living area to reduce your expenses.

  • Other real estate that can be sold or rented, such as vacation homes.

  • A second car can be sold if your family no longer needs two cars after retirement.

  • Recreational equipment such as travel trailers, ATVs, snowmobiles, and boats can be sold or rented when not in use.

Conducting a comprehensive assessment of your assets can help you determine where your values ​​lie and discover new ones income streams. Maybe you want to keep a winter cabin for your family so they can come out younger. Deciding what you want to sell and when can help you plan your current and future expenses.

If you are ready to match up with local advisors who can help you achieve your financial goals, then let’s start.

Select the desired expenses

SmartAsset: How long will $400,000 last in retirement?

SmartAsset: How long will $400,000 last in retirement?

You’ve worked all your life, and now it’s time to reap the rewards. While you want to make sure the future is taken care of, you also need to enjoy what you’ve worked for.

It’s hard to face the realities of aging, but there may come a time when you can’t climb a gondola to paddle through Venice, or go on a white water rafting excursion. The time to complete your to-do list isn’t when you’re wheelchair-bound in your 90s, but when you finally have the time, money, and health to enjoy it.

Splurge a bit, but keep track of what you’re spending and make sure it’s about what really matters to you. Balancing your desires for a rich life in your 60s shouldn’t come at the expense of not being able to afford home health care in your 80s.

Traditionally, financial advisors have agreed that the average retiree will need to replace 80% of their pre-retirement income with savings and Social Security benefits. But new research from the University of Michigan Retirement and Disability Research Center indicates that retirement spending declines over time across all socioeconomic levels.

You still need to keep money aside, but you may not need to expect to spend 80% of your preretirement income each year of retirement.

Safe withdrawal rate

It can be difficult to determine a safe withdrawal rate from your investments for long-term use. Expert opinions vary, but a widely accepted safe withdrawal rate follows 4% the normwhich was established based on the Trinity Study published in 1998.

The rule basically states that you can withdraw 4% annually from a well-diversified retirement portfolio, adjust 4% each year for inflation, and expect your money to last for at least 30 years.

With our $400,000 portfolio and 4% withdrawal rate, you can withdraw $16,000 annually from your retirement accounts and expect your money to last at least 30 years. If your Social Security checks are, say, $2,000 a month, you’ll have a combined annual income in retirement of $40,000.

It may not be enough for your current lifestyle, so you may have to consider resetting your priorities and expenses. If adjusting your expenses is not possible, it may be necessary to liquidate assets, develop rental income streams, or find meaningful part-time work.

If you withdraw too much from your portfolio at the beginning of retirement, your investments will not be able to grow and your available assets at the end of retirement will be greatly affected. While you can expect to spend less later, you’ll still need to be careful. Working with a financial advisor can help you see the individual impact large wallet withdrawals now have on your long-term financial health.


SmartAsset: How long will $400,000 last in retirement?

SmartAsset: How long will $400,000 last in retirement?

If you never spend your money, your $400.00 will last indefinitely. The trick is not how long it will take $400,000 to retire but how best to spend that $400,000. The more you spend now, the less you will get later. The less you spend now, the more you will want to enjoy the fruits of your savings while still having the energy to do so.

No one can tell you exactly where your values ​​lie, or exactly when your time will run out. Only you can tell which regret you will feel more acutely – regret for not saving or regret for not spending.

Retirement planning tips

  • a financial consultant They can help you create a financial plan for your retirement needs and goals. Free SmartAsset tool It matches you with up to three vetted financial advisors serving your area, and you can interview your own advisors at no cost to determine which one is right for you. If you are ready to find a counselor who can help you achieve your financial goals, let’s start.

  • If you want to know how much money you will have in retirement, SmartAsset’s free calculator It can help you get an estimate.

Photo credit: © iStock / South_agency, © iStock / staticnak1983, © iStock / Luke Chan

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