Many people worry about having enough income in retirement. And it's hard to get a handle on how much money you'll need if that milestone is pretty far away.
However, it may help you to know that according to recent Motley Fool research, the average American aged 65 and over spends $48,872 a year. As such, if you have access to a $50,000 annual income in retirement, it may be enough to cover your expenses.
Now the one caveat is that over time, inflation might make it so a $50,000 income no longer suffices. But for now, we'll go with that number since it's reflective of what older Americans are spending today.
You may be wondering how much retirement savings you'll need to come up with $50,000 a year. And the answer is, it depends on different factors.
The Social Security wild card
The average monthly Social Security benefit this year is $1,907, which amounts to about $23,000 a year. However, the rumors you may be hearing about Social Security cuts are true.
This isn't to say that benefit cuts are set in stone, but they're a possibility. So while the typical retiree today can perhaps expect about $23,000 a year from Social Security, that may not be the case in the future.
However, if benefit cuts don't happen, your monthly Social Security checks may be a lot higher than $1,907. That's because benefits are eligible for an annual cost-of-living adjustment. However, for simplicity purposes, let's assume that you'll get a yearly income of $23,000 from Social Security, which means that if you want a retirement income of $50,000 a year, $27,000 of that will have to come from savings.
What withdrawal rate will you use?
Financial experts have long advised withdrawing from retirement savings at a rate of 4% per year. As such, if you're looking to get $27,000 a year out of your IRA or 401(k) plan, then you'll need to go into retirement with a balance of $675,000.
Now that may seem like a daunting number. But one thing to remember is that the money in your IRA or 401(k) shouldn't just sit in cash. Rather, you should be investing that money so it grows over time.
To put it another way, to end up with a $675,000 nest egg, you don't necessarily have to contribute $675,000 to a brokerage account. You can contribute a lot less if your money grows nicely.
Over the past 50 years, the stock market has averaged a yearly 10% return. But let's be conservative and say your portfolio doesn't do as well.
Even if you only end up with a 7% yearly return on your investments, if you were to save $300 a month in a retirement fund account over 40 years, you'd end up with about $719,000, which gives you some leftover money to take some nice vacations during retirement.
Of course, if you think you'll stick to a more conservative withdrawal rate than 4%, it changes your savings target. If you only plan to hit up your savings to the tune of 3% per year, then to get $27,000 in annual income, you'll need a balance of $900,000.
The bottom line
The point, either way, is that a $50,000 retirement income is attainable if you start saving early in your career and you invest your money to capitalize on compound growth. In fact, a $100,000 retirement income may be just as doable if you commit to the cause from a young age and prioritize your long-term savings. So don't be afraid to set lofty goals, especially since many years from now, a $100,000 retirement income may be the equivalent of $50,000, depending on how inflation goes.
FAQs
That means to get $50,000 in annual interest, you need to save $1.25 million in total. And here's where the numbers get daunting. To save that much, you'll want to start early. Let's say you start saving at age 25 and plan to retire at age 65.
How much retirement savings do you need to live on $50,000 a year? ›
Take your estimated monthly expenses (be sure they're realistic) and divide that number by 4% to figure out how much income you'll need in retirement. For example, you'll need $1.25 million ($50,000 ÷ 0.04) going into retirement if you estimate that you'll need $50,000 a year to live comfortably.
How much do I need to invest to make $50,000 a year? ›
To cut to the chase, if you want your interest to earn $50,000, $70,000 or $100,000 per year, you'll need to have approximately $1.25 million to $2.5 million in savings or retirement accounts. If you're aiming for somewhere in the middle, like $70,000, you'd want to have $1.75 million saved.
How many Americans have $500,000 in retirement savings? ›
Believe it or not, data from the 2022 Survey of Consumer Finances indicates that only 9% of American households have managed to save $500,000 or more for their retirement. This means less than one in ten families have achieved this financial goal.
How much do I need to save for retirement to have 60k a year? ›
To accomplish this, financial experts say you'll need between 70-80% of your pre-retirement income. So, for example, a couple earning $60,000 per year would need between $42,000 ($60,000 x . 70) and $48,000 ($60,000 x .
What is the $1000 a month rule for retirement? ›
The $1,000 per month rule is designed to help you estimate the amount of savings required to generate a steady monthly income during retirement. According to this rule, for every $240,000 you save, you can withdraw $1,000 per month if you stick to a 5% annual withdrawal rate.
What is considered a good monthly retirement income? ›
The ideal monthly retirement income for a couple differs for everyone. It depends on your personal preferences, past accomplishments, and retirement plans. Some valuable perspective can be found in the 2022 US Census Bureau's median income for couples 65 and over: $76,490 annually or about $6,374 monthly.
Is 50K a year considered rich? ›
An annual salary of $50,000 is considered a middle-class income, and can be a comfortable wage for a recent graduate or a person starting a new career.
Is saving $1200 a month good? ›
That's still a lot. To get a little over $1 million in 25 years, Graves has you stashing away over $1,200 a month for retirement. But it's a lot less than $2,600 a month, and with Graves' calculations, you'll be putting in the money for 25 years instead of 40.
What is the safest investment for $50000? ›
High-Yield Cash Account
Considered one of the safest investments, a high-yield cash account can potentially keep your money safe. For example, savings and checking accounts, money market accounts and certificates of deposits (CDs) are considered cash accounts.
What are the average and median retirement savings? The average retirement savings for all families is $333,940, according to the 2022 Survey of Consumer Finances. The median retirement savings for all families is $87,000.
How many retirees have 1 million dollars? ›
The Reality of Million-Dollar Retirements
The dream of retiring with a million-dollar nest egg is a common aspiration, but the reality paints a different picture. According to estimates based on the Federal Reserve Survey of Consumer Finances, only 3.2% of retirees have over $1 million in their retirement accounts.
Is $10,000 a month good retirement? ›
Everyone isn't going to want to spend $10,000 net a month in retirement. For some people, that will be way more than they need each month. For others, it might not be enough. And there might be some people that spending $10,000 net a month in retirement is just right.
Is 50k a year a good retirement income? ›
However, it may help you to know that according to recent Motley Fool research, the average American aged 65 and over spends $48,872 a year. As such, if you have access to a $50,000 annual income in retirement, it may be enough to cover your expenses.
What percentage of retirees have $2 million dollars? ›
According to estimates based on the Federal Reserve Survey of Consumer Finances, a mere 3.2% of retirees have over $1 million in their retirement accounts. The number of those with $2 million or more is even smaller, falling somewhere between this 3.2% and the 0.1% who have $5 million or more saved.
Can you live comfortably on $50,000 a year? ›
Generally speaking, yes. An annual salary of $50,000 is considered a middle-class income, and can be a comfortable wage for a recent graduate or a person starting a new career.
How long will $1 million last in retirement? ›
For example, if you have retirement savings of $1 million, the 4% rule says that you can safely withdraw $40,000 per year during the first year — increasing this number for inflation each subsequent year — without running out of money within the next 30 years. Of course, the 4% rule isn't perfect.
How much should I save if I make 50k a year? ›
Say you're earning a $50,000 salary today; that means you need to save about 12.5% of your pretax income in an account like a 401(k) or traditional IRA to reach $1.25 million. And with a nest egg that size, you'd be able to keep your income right around $50,000 annually throughout retirement.
