Due to increasing life expectancies, many are running into the problem of outlasting their savings. Use this calculator to help determine when your retirement savings account may be depleted given a specified monthly income target. You may currently be in receipt of a company pension or other fixed income such as Social Security to help supplement your retirement savings account.
How Long Will Savings Last for Retirees
Today, more than 40 percent of new retirees stepped into retirement earlier than expected — while 55 percent cited medical issues or disability, 24 percent related the decision to workplace-related problems, such as downsizing or closure. The point is, retirement may come sooner than you expect. That’s why it’s essential to look at your portfolio and determine how long your retirement savings will last if you retire now, five years from now or 10 years from now.
Are My Retirement Savings Enough With Rising Life Expectancies?
Life expectancy has never been higher for Americans. Now, the average life expectancy for men 65 years of age today is 84.3 years, while women of the same age have an average life expectancy of 86.6 years. The steady increase in life expectancies has more people wondering if their retirement savings are enough.
When you’re planning your retirement, as well as your retirement funds, you want to look at the following factors:
- Targeted retirement age
- Investment portfolio
You also want to think about your budget and expenses as a retiree, along with the potential impact of inflation and market fluctuations. What kind of lifestyle do you want, and what type of lifestyle can you afford? If you’re going to retire at 63, which is the average retirement age, you would need a nest egg that could last you about 21 years as a male or 23 years as a female. The magic monetary number for your successful retirement, however, relies on your preferred lifestyle and expected retirement duration.
To see if your retirement savings are enough, as well as how long your retirement savings will last, use the four to five percent rule.
What Is the Four to Five Percent Rule and How Does It Affect My Retirement Planning?
In recent years, financial institutions have dedicated themselves to discovering the perfect formula for retirement planning. While the four to five percent rule isn’t foolproof, as you can’t guarantee market performance, it is an excellent starting point for determining how sustainable your retirement is, based on your portfolio, expected retirement age and current savings.
The basis for this rule is that you limit your annual withdrawals to four to five percent of your portfolio— the reason for this percentage range is because its success rate was 99 percent for conservative, growth and balanced portfolios in simulations based on historical data and a 25-year retirement plan. Because the four to five percent rule relies on a 25-year retirement plan, your withdrawal rate will decrease with longer retirements. A 35-year retirement, for example, will drop your withdrawal rate below four percent.
If you follow the four to five percent rule, you’ll need to plan for inflation, annuities and your expected retirement duration to see if your savings are enough.