What's a Realistic Retirement Budget? I'm 58 With $665k Saved, Making $95,000 Annually.
2025.02.06
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A retirement budget balances your expected income in retirement with your expected living expenses and taxes. Financial planners may use some rules of thumb to generate estimates of how much you are likely to receive in income and use to pay your costs after getting a good understanding of your goals, habits and circumstances.
In your situation, it’s likely you can live much as you are now after you stop working, assuming you receive Social Security and continue to invest and save until retiring at about age 66. Of course, this is also subject to many variables include your age of claiming benefits, your investing and saving practices over the remainder of your working life and how you plan to live in retirement.
A financial advisor can help you develop a detailed plan for covering your retirement expenses with the income you can generate.
Almost nine out of 10 retirees receive Social Security benefits, according to the Social Security Administration, so these monthly payments are likely to be a part of your retirement budget. How large a part depends on your based on your earnings record, year of birth and when you decide to claim your benefits. If you set up a free my Social Security account, you can review Social Security's estimate of the amount of your future benefit at the Social Security website.
You can also use SmartAsset's Social Security calculator to perform the estimate. This indicates that your first-year Social Security retirement benefit will be $41,683, based on your age of 58, income of $95,000 and claiming your benefits at age 66. If you claim earlier, you'll receive a lower benefit and if you wait until you're older, you'll get a larger benefit. These benefits are indexed for inflation, so they'll increase every year for as long as you are alive to receive them.
About 40% of retirees have Social Security as their only source of income, according to the National Institute for Retirement Security. With $665,000 saved for retirement by age 58, you can potentially expect that your nest egg can grow to $1,240,062 in eight years when you reach age 66. This assumes a 7% average annual investment return and annual added contributions of $9,500, equal to 10% of your income.
Many retirement withdrawal strategies employ something similar to the 4% guideline: withdrawing 4% of the balance of their account the first year of retirement and increasing that amount by the rate of inflation every year thereafter. According to models, there is a high likelihood that if you invest conservatively and withdraw using this strategy, you will not run out of funds for approximately 30 years, or until age 96.
Using the 4% guideline, your first-year withdrawal from your retirement account would be $49,602. If inflation increases by 2%, the next year you would withdraw $50,594 and so forth.
Some retirees may also have other sources of income, including part-time work or private pension benefits. In this case, assuming Social Security and retirement income are your only sources of income, we can add your estimated Social Security benefit of $41,683 with your estimated savings withdrawal of $49,602 to give you a total estimated retirement income of $91,465.
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With retirement income of $91,465, you would have approximately 96 percent of the pre-tax money you brought in from working available to pay your living expenses. This is significantly more than the 70% to 80% of pre-retirement income many planners recommend as adequate to fund a secure retirement lifestyle. The higher percentage figure primarily applies to low-income retirees and, since your income is above average for someone your age, you might still be comfortable with an amount closer to 70%. Of course, this all depends on your unique goals and circumstances.
Retirees have most of the expenses working people have, with housing being the largest single expense for the typical retiree. However, they often don't have many common expenses, including work-related costs, mortgages and, of course, saving for retirement. Retirees may have higher healthcare expenses as they age, however, and this can be an important budgetary concern. To create a more accurate retirement budget, prepare estimates of how much you'll spend based on what you are spending now and the changes you anticipate making, which may include downsizing or relocating to a less costly city.
Most retirees pay less in taxes than working people, because they don't owe payroll taxes and investment income may be in the form of tax-advantaged dividends. Also, only a portion of Social Security benefits are taxable. At your income level, approximately 85% of your Social Security benefit likely will be taxed as ordinary income, although you won't owe FICA taxes on it.
The type of account you used to accumulate your nest egg will affect how your income from this source is taxed. If you saved the entire amount in a taxable bank or brokerage account, withdrawals won't be subject to additional income tax. The same is true if you saved it in a Roth IRA account. If your savings are in a traditional IRA or 401(k) account, however, withdrawals will be taxed as ordinary income.
Remember, these examples are simplified for illustrative purposes. Consider speaking with a financial advisor about your own retirement plans, taxes and more.
With $665,000 saved for retirement at age 58 and $95,00 in current income, you are on track to replace nearly all of your pre-retirement income from Social Security and investment income after you stop working. According to some general rules of thumb, this is likely to be enough to pay for an enjoyable retirement lifestyle. However, your budget may differ from the benchmarks, so it's a good idea to try to estimate your retirement expenses using your current outlays and some educated guesses. Don't forget to account for taxes and potentially higher healthcare costs. You may also want to consider ways to reduce expenses by downsizing or relocating.
Finding a financial advisor doesn't have to be hard. SmartAsset's free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you're ready to find an advisor who can help you achieve your financial goals, get started now.
Use SmartAsset's Retirement Calculator to quickly see whether you are saving enough for retirement.
Keep an emergency fund on hand in case you run into unexpected expenses. An emergency fund should be liquid — in an account that isn’t at risk of significant fluctuation like the stock market. The tradeoff is that the value of liquid cash can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.
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