Have $500,000 in Retirement Savings? Here’s How Much You Could Spend per Year
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For a comfortable retirement, 26% of Americans said they’d need anywhere from $500,000 to $1 million. This key takeaway comes from a GOBankingRates January 2024 survey polling 1,005 Americans about their retirement savings.
Let’s say you have $500K as your retirement nest egg. Do you know how much you could withdraw from your portfolio during retirement to put toward yearly expenses?
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Follow the 4% Rule
Several financial experts that GOBankingRates spoke to referred to the 4% rule as a guideline to follow when making retirement withdrawals.
According to Asher Rogovy, chief investment officer at Magnifina, research shows that a well-managed portfolio can afford to provide 4% for withdrawal nearly indefinitely.
“The withdrawals would be replenished by the returns expected from a fairly conservative investment strategy,” said Rogovy. “A $500,000 portfolio could distribute $20,000 per year.”
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Should Your Withdrawal Rate Still Be 4%?
Not sure if you should withdraw exactly 4% of your retirement portfolio? Brian Kuhn, CFP and SVP, financial advisor at Wealth Enhancement Group, recommends keeping your average withdrawal rate between 4% to 5%.
Kuhn said it’s helpful to take less than the total 4% every month. This is especially helpful for retirees who think, or know, they may need to pay for unexpected expenses and need extra funds available.
What If This Amount Is Not Enough?
Retirees who find themselves in a situation where withdrawing $20K a year is not enough money to pay for necessary expenses should get in touch with their financial planner, recommends Melissa Murphy Pavone, CFP and director of investments at Oppenheimer & Co.
Because there is no one-size-fits-all answer to this question, Pavone said retirees will need the personalized guidance only a CFP can provide specific to their financial goals and risk tolerance. They’ll be able to help you estimate your cash flow needs in retirement and create a Social Security strategy as to when you should start claiming your benefits.
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This article originally appeared on GOBankingRates.com: Have $500,000 in Retirement Savings? Here’s How Much You Could Spend per Year
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