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 could reasonably expect to generate from your Roth withdrawals, combined with your Social Security benefits, will likely be a bit more than the typical retiree’s expenses. You can probably expect to be able to pay your bills for as long as you live without taking undue risk of running out of money. That’s not a guarantee, though. High inflation could reduce 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 risk and develop a plan to fund a comfortable and secure retirement.
Retirement income
To start with the income side of your retirement budget, you could probably withdraw $36,000 from your IRA Roth the first year of retirement, then increase this amount according to the annual inflation rate each year thereafter. This is the prescription of the 4% rulea guideline followed by many financial planners that suggests you can withdraw this percentage of a conservatively invested portfolio each year for about 30 years with minimal risk of running out of money. Since $900,000 times 4% equals $36,000, this is the amount you should consider for 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 just as simple, to a point. One of the great things about Social Security is that it is inflation-adjusted, with benefits increasing each year based on a cost-of-living adjustment. One potential downside to relying on Social Security is that at some point in the future, currently estimated to be around 2035, it may be necessary to reduce social security benefits by about 20%It’s far from certain that this will happen, as there are many solutions, but it is a possibility. For now, let’s assume that your annual retirement income will be $62,400, consisting of $36,000 from your Roth account and $26,400, or $2,200 per month, from Social Security.
A financial advisor can help you calculate your retirement income projections based on different scenarios. Get matched with a financial advisor free.
Retirement expenses
Your retirement expenses can vary greatly depending on your geographic location, health status, and preferred lifestyle, among other factors. For starters, location, The amount of annual income available to retirees in the United States varies from $20,542 in Indiana to $36,023 in Alaska. Overall, retirement income averaged $27,617, but that included the District of Columbia, a notable exception, where retirees have an average annual income of $43,080.
At $62,400, your expected annual retirement income is significantly higher than all of these numbers. As a result, you can likely expect to be able to afford an above-average lifestyle no matter where you live. However, if you need to cut back on your retirement expenses, moving to a lower-cost 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 Health care costs in retirement Health care costs can vary greatly depending on your personal health status. Wealthier retirees may spend 15% or more of their income on health-related expenses. Maintaining a healthy lifestyle, getting regular physicals, and reviewing long term care insurance And Health Savings Accounts can help moderate the financial impact of health as you age.
Lifestyle choices can make a huge difference in the cost of your retirement. 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 probably the main factors that will determine whether you fall at the higher or lower end of this range.
In addition to location, your desire to travel and enjoy entertainment and leisure opportunities is likely to have a significant impact on affordability. Many retirees travel less and participate in fewer entertainment and leisure activities as they age.
Talk to a financial advisor on your retirement potential. An advisor can help you develop an effective plan based on your goals and situation.
Conclusion
Your projected retirement income suggests that you will be able to afford a comfortable retirement in most cases. Your desired retirement location, your health, and your lifestyle choices all play a major role in how affordable your lifestyle will be. There are inevitably unpredictable factors in the form of possible future reductions in Social Security benefits and your own health. However, in most situations, you will likely find that you can afford to retire at age 66 and enjoy a comfortable lifestyle.
Advice
A financial advisor can help you make smart choices by balancing considerations like location when planning for retirement. Finding a financial advisor doesn’t have to be difficult. The free SmartAsset tool connects you with up to three financial advisors in your area, and you can interview the advisors you need for free to decide which one is best for you. If you’re ready to find an advisor who can help you achieve your financial goals, start now.
SmartAssets Retirement Calculator offers a quick and informative way to estimate how affordable your chosen lifestyle will be after you stop working.
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The post office I have $900,000 in a Roth IRA and would receive $2,200 per month from Social Security. Can I retire at 66? first appeared on SmartReads by SmartAsset.
