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.”
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.
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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