How Much Income Can My Retirement Account Provide?
By Mitchell J. Smilowitz, CPA
After a lifetime of saving, how much can you withdraw from your retirement account each year? The answer, of course, is unique for everyone. How old are you and your spouse when you retire? What other assets and income do you have? What do you expect your retirement lifestyle to cost?
If you are not in a position to answer these questions, the following table can help. The table allows you to estimate how much you can withdraw from your retirement account annually and reasonably expect the money in the account to last your and your spouse’s lifetime.
The table is based on the 4% rule. In brief, the 4% rule states that you can withdraw 4% of the funds in your retirement account annually with a 95% probability that your savings will last 25 years. How much annual income can you expect your retirement account to sustainably produce?
Retirement Account Balance | Annual Income Produced |
$100,000 | $4,000 |
$200,000 | $8,000 |
$300,000 | $12,000 |
$400,000 | $16,000 |
$500,000 | $20,000 |
$600,000 | $24,000 |
$700,000 | $28,000 |
$800,000 | $32,000 |
$900,000 | $36,000 |
$1,000,000 | $40,000 |
$1,500,000 | $60,000 |
$2,000,000 | $80,000 |
There are two takeaways from this chart. It can:
- Improve your understanding of how much you can sustainably withdraw from your retirement savings annually.
- Encourage you to increase your retirement contributions to 10%-20% of your income as soon as possible. The major factor determining your retirement account balance is the amount you contribute.
The JRB stands ready to assist you in any of these areas. We can work with you to develop a sustainable spending strategy in retirement, set a realistic savings goal while you are working and build an investment portfolio that allows you to reach your goal. Please contact us via email or call 888-JRB-FREE (572-3733) to discuss these, or any issues, surrounding retirement and financial planning.