The 80% Rule for How Much Money You'll Need
Financial planners commonly forecast retirement spending by assuming you'll need 80% of your pre-retirement income. It's important to realize this is just a general rule.
Bottom Line. With $800,000 in savings, you can probably cover $4,000 in monthly living costs. However, retirement accounts alone cannot safely sustain that spending for a 25- or 30-year retirement.
The average household retirement income in the United States is $27,617, according to an analysis by Wisevoter of data from the U.S. Census Bureau's American Community Survey. However, depending on where you live, your local average may be much higher or lower.
Saving 1500 a month at 23 is fantastic either way and based on your career choice, you are extremely likely to see significant increases in income as time passes. Keep your expenses reasonable, continue saving relatively aggressively and you will likely retire quite comfortably.
Top the amount with 401(k) savings, living on $3,000 a month after taxes is possible for a retiree. For those who only have social security benefits to rely on, there are many places where they can retire on their checks both in the USA and around the world.
The $1,000-a-month rule for retirement states that you'll need $240,000 in savings for every $1,000 of monthly retirement income. The rule assumes a 5% annual withdrawal rate. So if you want $4,000 in monthly retirement income from investments, you'd need to save at least $960,000.
Some of the biggest expenses you'll face in retirement are inevitable: health care, housing, transportation, utilities and taxes, for example. Though you can't eliminate these expenses entirely, you may be able to manage costs by planning ahead.
According to data from the Social Security Administration, as of January 2024, the average monthly retirement benefit payment was $1,909.01, which comes to about $22,322 per year.
In a world in which the average monthly Social Security benefit is just over $1,792, it may seem like a pipe dream to live off $10,000 per month in retirement. But the truth is that with some preparation, dedication and resolve, many Americans can reach this impressive level of retirement income.
While it's difficult to pinpoint an average retirement income, the most recent Census Bureau data indicates that people 65 and older have a median annual income of approximately $54,700 or nearly $4,560 per month. A financial advisor can help you create a retirement plan for the future. Speak with an advisor today.
Overall, the Bureau of Labor Statistics reported that people 65 years old and older spent $52,141 in 2021 (the most recent year of data available). That's $4,345 in average retirement costs per month. Retirees spend significantly less ($15,000 a year less) than the general population, who spend about $67,000 per year.
While this figure can vary based on factors such as location, family size, and lifestyle preferences, a common range for a good monthly salary is between $6,000 and $8,333 for individuals.
“Retiring on $2,000 per month is very possible,” said Gary Knode, president at Safe Harbor Financial. “In my practice, I've seen it work. The key is reducing expenses and eliminating any market risk that could impact your savings if there were a major market downturn.
If your spouse dies, do you get both Social Security benefits? You cannot claim your deceased spouse's benefits in addition to your own retirement benefits. Social Security only will pay one—survivor or retirement. If you qualify for both survivor and retirement benefits, you will receive whichever amount is higher.
You can start receiving your Social Security retirement benefits as early as age 62. However, you are entitled to full benefits only when you reach your full retirement age. If you delay taking your benefits from your full retirement age up to age 70, your benefit amount will increase.
Have you heard about the Social Security $16,728 yearly bonus? There's really no “bonus” that retirees can collect. The Social Security Administration (SSA) uses a specific formula based on your lifetime earnings to determine your benefit amount.
The rule of thumb is that you can expect your expenses to be 70% to 80% of what they were before you retired. So if you spent $1,000 each month before you retired, you could expect to spend about $700 to $800 each month in retirement.
As of 2022, the average monthly benefit amount from Social Security for couples was $2,739.10. That works out to about $32,868 in annual income. Of course, the income that you can expect to receive depends a lot on your circumstances.
“Almost half of American households will run short of money in retirement if they stop working at 65, new research predicts,” Marketwatch reports regarding a new study released by Morningstar.
You can retire comfortably on $3,000 a month in retirement income by choosing to retire in a place with a cost of living that matches your financial resources. Housing cost is the key factor since it's both the largest component of retiree budgets and the household cost that varies most according to geography.
How long will $300,000 last in retirement? If you have $300,000 and withdraw 4% per year, that number could last you roughly 25 years. That's $12,000, which is not enough to live on its own unless you have additional income like Social Security and own your own place. Luckily, that $300,000 can go up if you invest it.
It's Possible To Retire on a $1,500 Monthly Budget
But with a little creativity and flexibility, you may find a new home with everything you want, including a good climate, welcoming community and affordable lifestyle.