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How Long Will My Retirement Savings Last

How Long Will My Retirement Savings Last

Most Americans dream about retirement and most are afraid they will never be able to retire. Current cuts to Medicare, Social Security, and stock market fluctuations mean that there may be problems ahead. Few jobs offer much in the way of retirement benefits.  How long will your retirement savings last? There are several different factors to consider.

Life Expectancies

The average man can expect to live to 84.3 while the average woman may make it to 86.6. There are always those that exceed life expectancies. Your retirement savings need to be able to last those years between retirement and death. Most experts use 30 years of post-retirement life span as a good average. Most workers worry that they will outlive their savings, so take some time to see how you are situated for retirement.

Social Security

All workers pay into Social Security with the expectation that that money will be there when they retire. The current legislative desire to gut social security means that you should not depend on it to provide for your income. Your Social Security benefits take into consideration your earnings over your lifetime, the age you start receiving benefits, and whether you are eligible to receive your spouse’s benefits instead.

Social Security is based roughly on 35 of the highest-paid years of your work history to produce an average indexed monthly earnings (AIME). After this is gets complicated, but the Social Security Administration will explain your personal numbers if you contact them. You can start to receive benefits at age 62 and 8 months and must start withdrawals by age 70. How much you take, what age you start, whether you work while taking social security all determine how much you will get. The SSA is the best place to go with questions!

401(k) Type Retirement Plans

Various retirement plans allow you to put in a certain amount of money each year, either before or after taxes. In employer funded retirement plans, employers make a contribution and you can match or exceed that contribution. When you take the money out at retirement, it may be taxed or may not be taxed, depending on the plan. Talk with the broker who can set you up with a retirement plan for the benefits and penalties associated with each different type.

The biggest issue with these plans is that they are stock market dependent. Many retirees have taken hits almost annually since 2008 as the stock market crashes and recovers.  These fluctuations may mean that you may have less than you were expecting and need to be flexible in cutting spending. How long your 401(k) lasts is up to the starting amount, the stock market and how much you spend.

How Long Will 300,000 Last in Retirement?

Let’s say that you have $300,000 in retirement savings and you retire at age 65. If you live to age 85, you can spend about $15,000 a year. Since most experts recommend figuring on 30 years, you will be living on $10,000 a year. Of course, hopefully your retirement savings will continue to grow via the stock market, but that is a good starting point.

Hardly the glorious retirement you may have dreamed about.

The other way to look at it is to consider what you expect to need to live on each month in retirement. For this purpose, we are ignoring social security because it is too much of a wild card right now. Let’s say you live on $4000 a month. This represents a retirement amount of $960,000.

For most people that number is wildly unattainable.

Final Word

This article makes it seem like retirement is merely a dream. Keep in mind that it will be if you don’t start saving and investing money right now. The most important thing you can do to ensure your future is to start a retirement investment like a 401(k) or IRA and fund it as fully as you possibly can. Even a little will help. If you are a 20-something, retirement might seems a long way away, but it isn’t!