How to Retire on $60,000 a Year
If you're a middle income family, you might be wondering how much money you're going to need to retire. Let's take a look at a 66-year-old couple that's been earning $60,000 a year and see what the numbers tell us.
That means to produce $33,000 of inflation-adjusted distributions, you would need somewhere between $660,000 and $825,000 in retirement savings.
• A 5% distribution on $660,000 gets you $33,000, and a 4% distribution on $825,000 gets you $33,000.
Now that might seem like a lot of money, but it's about right. And the main reason you need so much is because of inflation. If inflation runs at 3% for the next 25 years, your initial distribution would need to grow from $33,000 to about $66,0000. Well, if you're taking out $66,000 a year, you can see that even a $660,000 portfolio probably won't last too long.
If you don't think Social Security will be around, then take Social Security out of your calculations and run the estimates just based off your savings. Now you'll see why Social Security is so important. Without it, you'd need somewhere between $1.2 million and $1.5 million just to produce $60,000 of retirement income.
Some flaws in this model but the gist is clear. The less a person earns, the harder it is to save enough for retirement. Making $30,000/yr and saving up $600-800,000 to maintain 30K/yr in retirement (excluding SS)...that's 20 + years of full income saved instead of spent. Fingers crossed on that 4% return with 3% inflation.
Reply With Quote