Building up a nest egg of $1 million in retirement savings might sound like a fortune, but it\u2019s within reach of many Americans who start saving and investing early in their careers. For example, if you invest 15% of a $60,000 salary into a retirement account for 30 years, earning an average of 8% in annual returns, you\u2019d retire a millionaire.<\/p>\n
Find Out: 11\u00a0Unusual Ways to Make Extra Money (That Actually Work)<\/a><\/p>\n Learn More: 8\u00a0Clever Ways\u00a0Retirees\u00a0Are Earning Up to $1K Per Month From Home<\/a><\/p>\n That said, $1 million doesn\u2019t go as far as it used to. While it can be a comfortable retirement, it still requires careful budgeting to make sure your money lasts the rest of your lifetime.<\/p>\n \u201cRetiring with $1 million in savings is totally possible today, but it takes thoughtful planning,\u201d said Amber Schiffert, co-founder of Tara Wealth.<\/p>\n Here\u2019s what $1 million in retirement savings could look like on a monthly basis in retirement<\/a>.<\/p>\n How $1 Million Translates Into Monthly Retirement Spending<\/p>\n There are a few ways to approach drawing down your retirement savings so you have enough to live comfortably.<\/p>\n One strategy is the 4% rule, where you withdraw 4% of your portfolio each year, adjusting for inflation. With $1 million in retirement savings, \u201cusing the 4% rule, that gives you about $40,000 a year to safely withdraw from your investments,\u201d Schiffert said.<\/p>\n That translates into about $3,333 per month, although taxes might reduce that amount, depending on your retirement accounts. Regardless, that amount alone may be enough for some retirees, such as those who have paid off their mortgage and car loans.<\/p>\n Retiring with $1 million is possible, according to Chad Gammon, CFP, owner of Custom Fit Financial. \u201cI\u2019ve seen people retire with even less than $1 million \u2026 They typically have very low living costs that are as low as $40,000 per year or lower. They might also work until age 65 or 70 to maximize their Social Security with benefits around $20,000 to $40,000 per year. They also typically do not have debt and enjoy the simple things in life,\u201d Gammon said.<\/p>\n However, not everyone can live on $3,333 per month. While other sources of income like Social Security might help, if you\u2019re trying to simply calculate what $1 million in retirement savings gets you, another option to consider is spending down your nest egg, rather than treading water with the 4% rule.<\/p>\n For example, if you wanted to pull out $5,000 per month from your retirement savings and the balance still earned 4% per year after taxes, that would last you approximately 27 years (not factoring in inflation). That could be enough for many, although some might end up outliving this time frame. Dropping the withdrawal slightly to, say, $4,500 per month would make your savings last longer.<\/p>\n \u201cTo make sure this works for you, you\u2019ll also want to ensure your other sources of income such as Social Security, rental income and pensions combined with your investment withdrawals can support your lifestyle. And don\u2019t forget to account for rising healthcare costs and inflation. If overlooked, these two major factors can significantly impact your financial security and retirement portfolio,\u201d Schiffert said.<\/p>\n Read Next: 12\u00a0Things You Must Do When Your Savings Reach $50,000<\/a><\/p>\n What a Monthly Budget Might Look Like<\/p>\n Suppose you decide to draw down your retirement savings and took out $4,500 per month. That, combined with the average Social Security monthly benefit of nearly $2,000, would leave you with around $6,500 pretax. Post-tax amounts can vary significantly depending on your situation, but let\u2019s assume for simplicity in this scenario your blended federal and state tax rate is 15%, leaving you with about $5,525 per month.<\/p>\n Using the 50\/30\/20 budget rule<\/a>, that means 50%, or $2,762.50, could go toward your needs. That\u2019s much more feasible if you don\u2019t have monthly rent or a mortgage.<\/p>\n Then, 30%, or $1,657.50, could go toward your wants, such as eating out and travel. Depending on your lifestyle, that \u201cwants\u201d bucket could go quickly, but if you roll some over from month to month, it could be enough to take some significant trips in retirement.<\/p>\n Lastly, 20%, or $1,105, could go toward savings. Since you\u2019re already pulling from retirement savings in the first place, this probably isn\u2019t going to be a long-term savings bucket. Instead, you might think of it as more of an unexpected expense category, like a doctor\u2019s bill that exceeds your needs budget or an unplanned home repair.\u00a0<\/p>\n How Far Does $1 Million Go?<\/p>\n As you can see, $1 million doesn\u2019t necessarily go all that far in retirement, but it\u2019s possible to still set yourself up for success, especially if you can supplement with other income sources, like Social Security, and plan your budget carefully<\/a>.<\/p>\n \u201cMy top tip would be to delay Social Security as long as possible. Once you are past your full retirement age and wait one year, it is like getting an 8% raise. An example would be delaying from age 67 to 68. I ask clients how often they received a 8% raise at work and it is not common, and it resonates to wait,\u201d Gammon said.<\/p>\n And if you\u2019re not sure where your retirement savings stand or how to plan effectively, meeting with a financial advisor can help.\u00a0\u201cIt can also be a good idea to get low-cost financial help from hourly for flat fee advisors that can help create a dynamic withdrawal strategy to adjust on a yearly basis. You would spend less in a down market, and take out more after a good market year. The only thing I would note is that you have to be able to adjust your budget and that can be difficult for people,\u201d Gammon said.<\/p>\n More From GoBankingRates<\/p>\n This article originally appeared on
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