Retirement Totals Needed to be Comfy

How much money will I need to retire?

A lot most likely. It all depends on when you plan to retire, how long you plan to live and how frugally you want to live. Do you like Ramen noodles…a lot? : )

Your retirement portfolio will likely be a mix of social security, 401K, Roth IRA, pension (if you are lucky), savings, home equity and traditional IRA.

What should my 401K balance be at retirement?

I say one needs $500k to $1 million or more. Given the average 401K balance is around $103K that does not bode well for people. Why is that?

  1. Let’s say you have $150K saved. That would give you a payment stream of $989 per month pre-tax at 5% interest over twenty years. That amount is taxable however so you likely only get 75% of that meaning $742 per month. That may not even cover rent and mortgage. Ouch.

2. Let’s say you get another $600 per month from Uncle Sam post tax. Well that is $1342 per month. You can’t live well on that. Imagine if you have to pay rent! You are going to need to move to a cheap place like Nebraska to cut costs. I hear that place is nice in the winter. : )

3. The other kicker is that you could live longer than 20 years and outlast your savings. All you would be left with is social security. Ouch.

What if you had $500K saved?

  • At $500K balance you would get $3299 pre-tax and $2475 post tax
  • At $1 million you would get $6599/month pre tax. Bye bye ramen packs! Hello steak, lobster and shrimp!

That is why you need to save aggressively now!

  • Bump up that 401k contribution
  • Cut costs
  • Start a Roth IRA or traditional IRA

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