Are you planning for retirement? If so, you’ve most likely heard retirement gurus and other influential people say that you need at least $1 million saved. Would you be surprised to learn that this isn’t the case? In fact, only 16% of retirees say they have more than $1 million saved for retirement, according to a mid-2024 study by CNBC and SurveyMonkey.
Learn More: How Long $1 Million in Retirement Will Last in Every State
For You: 10 Steps To Prepare For Retirement
This article will explore what to consider when planning financially for retirement and how those considerations impact retirement planning with different amounts saved.
General Retirement Considerations
There are a few different factors to keep in mind as you evaluate your retirement plan:
- Other Income Streams: Social Security, pensions, rental income, annuities and other investment income can alter the trajectory of your retirement plan. These assets aren’t always included in your overall retirement balance.
- Retirement Area: Where you plan on retiring has a big impact on your plan. Moving to the Midwest can be more affordable compared to California, for example.
- Plans: If you plan on traveling the world during retirement, your cost of living might be higher. Think about your retirement goals and the associated costs.
- Taxes: If all of your funds are tied up in pre-tax accounts, you will need to factor income tax into your plan. This is why many retirees move to states with no income tax, like Florida.
Find Out: How Far $750,000 in Retirement Savings Plus Social Security Goes in Every State
What Retirement Planning Looks Like With Different Amounts
There’s no one-size-fits-all approach when it comes to figuring out how much you need to retire. Retirement is highly specific and personal.
For example, you might be able to live on $50,000 a year, while your friend might require $150,000. Nevertheless, most retirement experts agree that you can safely withdraw 4% of your account balance each year and never run out of money. Here’s what that might look like at different savings levels.
$250K
With $250,000 saved, you can safely withdraw $10,000 per year from your retirement accounts. At this savings level, you might not have enough to retire, as it’s very difficult to live on only $10,000 per year. However, if you have Social Security income or another income stream, this might be doable, if not comfortable.
$500K
At $500,000, you can withdraw $20,000 per year using the 4% rule. This might be enough to cover your housing and food in a low cost of living area, but there isn’t much room for anything else without additional income. If you have a paid-off home and have some type of government support, retiring on $500,000 may be an option.
$750K
At $750,000, you are setting yourself up for a more comfortable retirement. Following the 4% rule, you can withdraw $30,000 per year from your retirement accounts and not have to worry about running out of money. Pair this $30,000 with relatively high Social Security income or a low cost of living, and you might not need to save any more money.
The Bottom Line
Where are you on your retirement journey? It is possible to retire with under $1,000,000; however, you want to set yourself up for success.
For one, your housing costs will have a big impact on your retirement plan. Make it a goal to pay off your house or find more affordable housing prior to retirement. The same goes for your vehicle. If you are moving to an area with good public transporation or walkability, you might not even need a vehicle, saving you on gas and insurance.
If you’re looking for more personalized retirement advice, it’s always best to reach out to a qualified financial planner.
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This article originally appeared on GOBankingRates.com: What Does a Realistic Retirement Look Like If You Have Less Than $1 Million Saved?
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