How to Retire at 70 With $250K in Savings and $3,000 Monthly Social Security
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If you’re in your mid-60s and still working, it may be time to start seriously planning for retirement. That doesn’t mean you need to leave work immediately, but retirement is likely on the horizon.
Imagine you’re 65 years old, you have $250,000 in an IRA and expect to receive $3,000 per month from Social Security. Can you retire at age 70? Depending on your personal circumstances and risk tolerance, This could be enough money to generate some financial security, although much of your flexibility would depend on how you manage the IRA for the next five years.
If you need additional help planning for retirement, consider speaking with a financial advisor.
If you plan to retire in five years and have $250,000 in your portfolio, how you manage your IRA will go a long way to determining what kind of retirement you can expect. Five years isn’t a lot of time, but it’s still enough time for some significant growth. Consider these three hypothetical scenarios:
Currently, investment-grade bonds are paying an average 5.6% yield. If you invest your whole IRA into bonds right now, you could expect to retire with about $328,291. Since bonds issue a rate of return backed by the credit of the underlying institution, your odds of volatility or loss are low.
Investing all of your assets in an S&P 500 index fund could produce higher returns than bonds, but it’s a riskier option. But based on the market’s approximate average rate of return (10%), putting everything into the stock market could potentially leave you with $402,628 by age 70. And if you had lots of time for the market’s fluctuations to even out, this might be an excellent plan. But five years is likely too short of a window to justify investing 100% in equities.
Conventional wisdom is to split your assets into a mix of stocks and bonds. By your 60s, this is often either a return-heavy portfolio of 60% stocks and 40% bonds or a safety-heavy portfolio of 20% stocks and 80% bonds. Historically, a 60/40 portfolio has grown at around 8.77% per year, according to Vanguard. While past performance doesn’t guarantee future results, if we assume your IRA grows at 8.77% per year over the next five years, it would be worth about $380,615 by age 70.
None of these strategies will transform your financial situation, but a strategic mix of stocks and bonds could provide you with a combination of growth and safety. A financial advisor can potentially help you find an asset allocation aligned with your risk tolerance and goals.
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