McClanahan noted that even combined with an average Social Security benefit, $250,000 in savings is only likely to produce $2,632 a month over 25 years, when inflation and other factors are considered. That would mean a difficult struggle for many Americans.
A $250,000 immediate annuity could pay as much as $1,498 a month or $17,979 a year for a 65-year-old woman. Annuity companies take multiple factors into account when calculating the payout of a $250,000 annuity, including the annuitant's age and gender and the start and duration of payments.
Ideally, you can live off the interest without touching your investment principal. While many investors may not be able to live off the interest from $250,000, it could supplement other sources of retirement income to meet their needs.
According to Blueprint Income, the average monthly payouts for men aged 60 to 75 investing in a $200,000 annuity could range from about $14,000 to $20,000 per year — $1,167 to $1,667 per month. For women, however, those rates drop to a range of $13,710 to $19,076, or $1,143 to $1,590 monthly.
With $200,000 in your retirement savings and factoring in the average annual rate of return between 10–12%, you'll have between $20,000 and $24,000 to live off of each year.
It's important to have a savings account with a bank that's insured by the Federal Deposit Insurance Corp. (FDIC). This way, you won't lose your funds should the bank fail. The FDIC insures up to $250,000 per depositor, per FDIC-insured bank, per ownership category.
The basics. If you retire at 55, and the average life expectancy is around 87, then 250K will need to last you 30+ years. If it's your only source of retirement income until the state pension kicks in then you are going to have to budget hard to make it last.
Making $4,000 a month based on your investments alone is not a small feat. For example, if you have an investment or combination of investments with a 9.5% yield, you would have to invest $500,000 or more potentially. This is a high amount, but could almost guarantee you a $4,000 monthly dividend income.
The type of annuity you choose can significantly impact your monthly income. With a $300,000 fixed immediate annuity, a 65-year-old man could receive around $1,450 to $1,950 per month for life, while a 65-year-old woman may get $1,800 to $2,200 per month.
Depending on how you manage your money, you can probably expect an annual income between $48,000 (at roughly $4,000 per month) and $63,000 (at roughly $5,300 per month). More is possible if you invest for more aggressive returns, but that will mean taking on more risk.
Most financial advisors will tell you that the best age for starting an income annuity is between 70 and 75, which allows for the maximum payout. However, only you can decide when it's time for a guaranteed stream of income.
Savings and money market accounts.
Depending on your balances and where you open your account, your interest rate will vary. Many high-yield savings accounts from online banks offer rates from 2.05% to 2.53%. On a $250,000 portfolio, you'd receive an annual income of $5,125 to $6,325 from one of those accounts.
Someone who makes $250,000 a year, for example, could be considered rich if they're saving and investing in order to accumulate wealth and live in an area with a low cost of living.
As an example, your annual withdrawal at age 68 could be around $15,000, and by age 80, that withdrawal could be around $18,000. In sum, a $250,000 annuity could realistically pay you from $1,071 (guaranteed) up to $1,912 (non-guaranteed) per month.
Longevity. No one knows how long their retirement will last. But it's generally safe to assume you'll be retired for at least 20 years.
You can probably retire at 55 if you have $4 million in savings. This amount, according to conventional estimates, can reliably produce enough income to pay for a comfortable retirement.
Only 2.9% of earners make more than $250,000 a year (CNBC). On a nationwide and worldwide scale, many consider this to be wealthy. But some people within this income level hesitate to call themselves rich – identifying more in the upper middle class.
You shouldn't oversaturate your investment accounts either, as you'll still only get $250,000 in FDIC insurance per type of account. But you can have a retirement account, a single account, a joint account and other types and still get the $250,000 in FDIC insurance per type of account, even within the same bank.
Investing through an individual retirement account (IRA) or 401(k) can provide larger gains. For instance, a portfolio invested in the S&P 500 index has provided an average annual return of 10% since its inception. Assuming 3% inflation and 0.5% management fees, $250,000 can provide $16,250 of income per year.
$3,000 X 12 months = $36,000 per year. $36,000 / 6% dividend yield = $600,000. On the other hand, if you're more risk-averse and prefer a portfolio yielding 2%, you'd need to invest $1.8 million to reach the $3,000 per month target: $3,000 X 12 months = $36,000 per year.
One frequently used rule of thumb for retirement spending is known as the 4% rule. It's relatively simple: You add up all of your investments, and withdraw 4% of that total during your first year of retirement. In subsequent years, you adjust the dollar amount you withdraw to account for inflation.