Retirement is a huge milestone, and one of the biggest questions people face is whether they have enough saved to live comfortably.
If you already have $1.2 million saved at age 62, you’re probably wondering if that’s enough to get you through your retirement years. But more importantly, will this piggy bank allow you to live a financially stress-free life? The answer depends on your spending habits, your health and how long you expect to live.
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A hypothetical scenario
Let’s say you’re 62, still working, planning to retire soon and have $1.2 million in the bank. According to the Bureau of Labor Statistics, the average household headed by someone age 65 or older spends about $52,141 per year. This amounts to just over $4,345 per month in living expenses. With that as a starting point, the question becomes: will your $1.2 million hold up?
How the 4% rule fits
A common strategy that retirees use is the 4% rule, which requires you to withdraw 4% of your retirement savings each year. Based on this rule, $1.2 million would earn you approximately $48,000 per year or $4,000 per month. That’s close to average retirement expenses, but doesn’t leave much room for perks.
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Add Social Security
Don’t forget social security. The average monthly benefit for retired workers in 2024 is $1,919.40. If you combine that with the $4,000 from your 4% withdrawals, your total income could be around $71,033 per year – putting you above the average spend of retirees. Of course, your actual Social Security benefits will depend on factors such as when you start claiming them and your work history. If you delay taking Social Security until age 70, you can actually increase these benefits.
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Healthcare costs to consider
Healthcare is one of the biggest wildcards in retirement. Fidelity estimates that a 65-year-old couple retiring in 2024 will spend approximately $165,000 on medical expenses during their retirement years. That’s about $3,300 per year per person, costs you should take into account. If you are healthy this may not be a big deal, but if you have health problems it could become a bigger part of your budget.
The impact of inflation and longevity
Another important factor is inflation. Historically, inflation has averaged about 2.5% per year. Twenty or thirty years into retirement can erode the purchasing power of your savings. Moreover, people live longer. The life expectancy of someone now 62 extends well into their 80s, and many live even longer. The longer you live, the more you need to save for your retirement.
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Does $1.2 million provide enough support?
Does $1.2 million give you enough support? For many, yes. Your savings and Social Security income can comfortably cover your living expenses. However, there are a few things that can change that picture:
While €1.2 million is a strong starting point, your unique circumstances will depend on whether this is enough for a completely stress-free retirement.
You should be in a good position if you keep your expenses in check, take Social Security into account, and plan for potential medical costs. However, it’s always a good idea to talk to a financial advisor to create a plan tailored to your needs to ensure you’re fully covered for years to come.
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This article I am 62 years old and have saved $1.2 million. Is this enough to retire stress-free? originally appeared on Benzinga.com
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