How to Calculate Savings Withdrawals for a Long, Successful Retirement Savannah Munholland
Detroit, MI
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February 23, 2023 07:00 AM Eastern Standard Time
Planning for a successful retirement can feel overwhelming. You’ll want to make sure you have enough retirement income to cover your expenses, while also preserving your savings for years to come.
The key to a successful retirement is being prepared and understanding how to use your savings. If you’re wondering how much you should withdraw from your retirement fund, you may want to use a savings withdrawal calculator. It’s also a good idea to talk to a retirement adviser on a platform like Retirable to ensure you have a solid plan in place for your retirement.
When Can You Start Making Withdrawals?
Withdrawals from retirement accounts such as a 401(k) or individual retirement account (IRA) are allowed when the account owner turns 59½. Withdrawals made before that age will result in a heavy tax penalty. It’s a good idea to wait as long as possible before starting to make withdrawals. The longer your retirement account has time to grow, the more successful you’ll be in retirement. For example, many people retire at age 65 or later. Those extra five years of contributing and growing your retirement account can be instrumental in ensuring you have enough saved.
Calculating a Successful Retirement
Every retiree has different lifestyle expectations, financial situations and expenses, so each retiree should have a personalized financial plan. Here are some tips and considerations to help guide you toward creating your own retirement plan.
The 4% Rule
Many financial advisers and retirement professionals recommend following the 4% rule. The 4% rule advises retirees to withdraw only 4% of their retirement income every year. This rule helps ensure that your retirement savings will continue to last well into retirement. If you only take out 4% of your savings per year, your retirement savings should last about 25 years. So if you start taking withdrawals at 65, you’ll be covered by your savings until you’re about 90 years old.
Use a Savings Withdrawal Calculator
Using a savings withdrawal calculator can help plan for how much you take in monthly withdrawals. For example, say a retiree has $500,000 saved in their retirement fund. Following the 4% rule, they can see how much they could take in annual distributions.
0.04 x $500,000 = $20,000
So a retiree with $500,000 saved could take $20,000 annually in withdrawals. Now see how much that is in monthly income.
$20,000/12 = $1,666.67
If this retiree was sticking to the 4% rule, they could take about $1,666 every month in a distribution. Again, it’s important to remember every retiree is different, and talking with a personal adviser can help find the plan that’s best for you. You can also use Retirable’s retirement income calculator for more guidance.
Consider Social Security Income
Retirement accounts aren’t the only source of retirement income. In retirement, you’ll also get Social Security payments to help round out your income. You should be strategic about when you begin taking Social Security. You can begin to receive benefits as young as 62, but the amount you receive will be lower than if you wait. After 62, your benefits will increase with every year you wait until you reach full retirement age at 70. At 70, you’ll be getting the maximum benefits possible.
Talk to a Retirement Adviser
Using these calculators is a great way to start planning for your retirement. For a custom solution based on your unique situation, you should talk to a financial adviser. Retirement advisers can consider your income and expenses to let you know how much you should be saving each month, where to invest and at what age you can retire successfully. Once you retire, they can help you construct a withdrawal plan that suits your lifestyle and financial situation.
Calculate Your Way to a Successful Retirement
Retirement can be some of the best years in a person’s life. But it can be overwhelming and difficult to plan for. Retirable offers an intuitive retirement platform that helps you grow your savings and access a personal retirement adviser. With the help of your adviser, you’ll be able to create a plan that works for you and have the peace of mind that you’re headed to a successful retirement.
This post contains sponsored advertising content. This content is for informational purposes only and is not intended to be investing advice.
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