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The Number Of Years $100,000 Will Add To Your Retirement Fund, Visualized

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The Number Of Years $100,000 Will Add To Your Retirement Fund, Visualized
It's never too late to start saving, especially when even modest amounts can turn into big retirement funds over time.
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SmartAsset analysts did the math on retirement accounts to see how far your funds will realistically take you. They looked at three retirement investment account values: $400K, $500K and $600K.

Their model estimated spending at $50,595 per year, based on the average amount for persons between the ages of 65 and 74. They determined social security would cover nearly 39 percent of those yearly costs, leaving a retiree with around $2,559 worth for out-of-pocket expenses, which according to estimations could bump up by 2.2 percent each year.

Compounding returns, like Roth IRAs, are slow, steady and good. If you start with $5,000 in one (with a five percent return and 25 percent tax rate) at 51, you're looking at an additional $103,000 by 65.





Via SmartAsset.

Comments

  1. Chris Conn 1 year ago

    A couple of numbers are off with this article:
    a) 39% * $50,595 = $19,732 and $2,559 * 12 = $30,708, $19,732+$30,708=$50,440
    b) $50,595×.61=$30,862.95, which is how much needs to be taken out of 401K.
    3) $30,708 / $500,000 = 6.15% withdrawal rate, not 4% of $500k, which would be only $20,000

    With that being said, I believe 6% would be a good rate to withdrawal if you're at $500k in retirement savings if you're about 65 years old, if you keep the money invested in dividend paying stocks or mixture of growth and safe investments.

  2. Robert Frick 1 year ago

    Using a 401k, an IRA or any account IN the market is also going to be a big factor in how much money you retire with. There’s too much risk involved in the standard retirement accounts available through your employer. This article also does not look at what’s possible through indexed strategies.

  3. -hh 1 year ago

    FYI, it isn't clear, but the "$2,559" value is the monthly expense that's not covered by Social Security. The basic math is ($50,595*(1-.39))/12

    But this is a pretty lightweight (and useless) article.

    A better analysis would be to note that using the 4% rule of thumb (for a simple method of determining what's a sustainable retirement budget allocation), the $400K saved retiree only has enough money to cover $1300/mo of their after-SS $2559/mo additional expenses, resulting in a $1226/mo drawdown rate. To make sure their money outlasts them, they either need to die early, cut back on their expenses, or start to save more to have more in retirement.

    Likewise, the $600K saved retiree has enough to cover $2000/mo, so they have a $559/mo budget shortfall to cover to make sure that their money outlasts them.

    From this perspective, the "save more" option for any of them can use the 4% Rule of Thumb to conclude that each +$100K that they save for retirement will improve their sustainable retirement budget by $133/month.

    This provides insight on the decision of "save more" vs "cutback retirement spending", since that's not a single Yes/No binary, but a continuous variable where one can do some of both.

    1. Chris Conn 1 year ago

      I know several people that are retired, one who has about $1.5M but his dividends alone pay about $90k/yr, and yes it's in mostly safe companies like ADP, AAPL, etc., although he doesn't cash out all his dividends every year, but buys more dividend stocks.

    2. Robert Frick 1 year ago

      Great point. The article does not take into account the taxes taken upon disbursement by the federal government or the fact that SSI may not be available to those retiring later than 2035.

      1. Chris Conn 1 year ago

        I will venture to say there will be SS well past 2035. That's one of the 3rd rails in public safety net.
        SS benefits may be cut by 20% but I highly doubt it. I believe they'll have to increase SS taxes along with taxing higher amounts instead of limiting the cap to $147k (in 2022). Besides there are more Gen-Z folks than Boomer generation that will get into office and want something back for all their earned contributions.

  4. Peter McDougall 1 year ago

    Who is this for? Certainly not anyone under 35 in the United States.

    1. Robert Frick 1 year ago

      Mainly the baby boomer generation. Gen X’ers and millennials will not have SSI to look forward to.

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