Retiring at age 66 with $900,000 in a Roth IRA and $2,200 in Social Security benefits is probably a reasonable plan for many retirees. The income you can reasonably expect to generate from your Roth withdrawals, combined with your Social Security benefits, will likely be slightly higher than the average retiree’s expenses. You can probably expect to be able to pay your bills for as long as you live, without the unnecessary risk of running out of money. However, this is no guarantee. High inflation could erode the purchasing power of your Roth withdrawals, or you could face unexpected expenses, such as long-term care.
A financial advisor can help you assess your risks and develop a plan for financing a comfortable and secure retirement.
To start with the income side of your retirement budget, you can probably withdraw $36,000 from your Roth IRA in the first year of retirement, and then increase that amount each year at the annual rate of inflation. This is the prescription of the 4% rule, a guideline followed by many financial planners that suggests you can withdraw that percentage of a conservatively invested portfolio annually for about 30 years with only minimal risk of running out of money. to sit. Since $900,000 times 4% is $36,000, this is the stated amount of your first annual withdrawal. For subsequent years, you will need to make assumptions about your portfolio growth and inflation rates to calculate an appropriate withdrawal.
Your social security is also simple to a certain extent. A strong advantage of Social Security is that it is inflation-adjusted, with benefits increasing each year based on cost-of-living adjustments. A potential disadvantage of relying on Social Security is that in the future, estimated around the year 2035, it may be necessary to reduce Social Security benefits by about 20%. It is far from certain that this will happen as there are numerous solutions available, but it is a possibility. For now, assume your annual retirement income is $62,400, consisting of $36,000 from your Roth and $26,400, equal to $2,200 per month, from Social Security.
A financial advisor can help you calculate projections of your retirement income based on different scenarios. Get matched with a financial advisor for free.
Your retirement expenses can vary greatly depending on your specific location, health status and desired lifestyle, among other things. Starting with location, the annual income of retirees in the United States ranges from $20,542 in Indiana to $36,023 in Alaska. Overall, retirement income averaged $27,617, but that included the District of Columbia, a significant outlier where retirees averaged $43,080 in annual income.
At $62,400, your projected annual retirement income is comfortably more than all of these figures. As a result, you can probably expect to afford a better-than-average lifestyle wherever you live. However, if you need to reduce your expenses in retirement, moving to a cheaper state or city can make a significant difference in the lifestyle you can afford.
The financial impact of your health condition is another important factor. Your healthcare costs after retirement can vary greatly depending on your personal health status. At the high end, retirees can spend 15% or more of their income on health care-related expenses. Maintaining a healthy lifestyle, getting regular checkups, and exploring long-term care insurance and health savings accounts can help ease the financial impact of your health as you age.
Lifestyle choices can make a big difference in how affordable your retirement is. Retirees typically spend between 55% and 80% of their pre-retirement income after they stop working. This is a wide range and your personal preferences are likely the most important factors in determining whether you are at the high or low end of that range.
In addition to location, your desire to travel and enjoy entertainment and recreational opportunities likely has a major effect on affordability. Many retirees travel less and participate less in entertainment and recreational activities as they age.
Talk to a financial advisor about your pension options. An advisor can help you create an efficient plan based on your goals and circumstances.
Your expected retirement income shows that you can afford a comfortable retirement in most circumstances. Your desired retirement location, health status and lifestyle choices all play a major role in how affordable your lifestyle will be. There are inevitably wild cards in the form of possible future cuts to Social Security and your own health status. However, in most situations, you will probably find that you can afford to retire at age 66 and enjoy a comfortable lifestyle.
A financial advisor can help you make wise choices when considering issues such as location when planning your retirement. Finding a financial advisor does not have to be difficult. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisors for free to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
SmartAsset’s Retirement Calculator provides a quick and informative way to estimate how affordable your chosen lifestyle will be after you stop working.
Have an emergency fund on hand in case you encounter unexpected expenses. An emergency fund should be liquid – in an account that is not at risk of significant fluctuations like the stock market. The trade-off is that the value of liquid cash can be eroded by inflation. But with a high-interest account, you can earn compound interest. Compare savings accounts from these banks.
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The post I have $900,000 in a Roth IRA and would receive $2,200 monthly from Social Security. Can I retire at the age of 66? first appeared on SmartReads by SmartAsset.
