In this post we’re going to:
- take a look at the average savings for people at age 60
- see how you compare
- look at what you should have in retirement savings by age 60
If you’d like some ways to help increase retirement income, click here to have a conversation with me.
Now, to start out, let’s consider the average balance and the median balance between five different 60-year-old future retirees: $600,000, $320,000, $68,000, $42,000, and $30,000.
The average out of those five numbers is $212,000, and the median is $68,000, based on Fidelity’s report of 401k balances. The median balance shows that many people have saved less than $68,000. And keep in mind that the average may be skewed because there’s some very large 401k balances out there.
So what does this actually mean for you and what should you have saved now?
In order to know that, we need just three important numbers:
- The amount saved for retirement
- Your pension or social security income
- How much you’d like to spend each month (What are your expenses?)
You could use your numbers to get a general understanding of what might be possible, but if you’re looking for more than just general information, and you want to have a little bit more clarity and confidence with your plan, then feel free to reach out to me.
But let’s get back to the just general numbers here, based on the list above:
Pretend (1) we’ve got a $500,000 balance saved up, and (2) social security income is going to be $2,500 a month, and (3) your expenses are going to be $4,000 a month.
First, take that expense number and subtract the $2,500 to see what we need to withdraw from savings, and then multiply that number by 12.
(4000 – 2500)*12 = 18000
Based on this formula, you need $18,000 per year from your savings.
Next, take that $18,000 and divide by the saved $500,000.
18000/500000 = 3.6%
That’s going to give you 3.6%. Now you’ve probably heard of the 4% rule, and that’s a good place to start. In this example, you’re withdrawing under 4% in your sixties, so you should be in a pretty good spot.
But be aware, because a lot depends on your investment allocation and what sort of investments you have in your accounts. The rule-of-thumb 4% number is commonly used in financial planning. It looks at history, it takes a portfolio of 50-50 mix of stocks and bonds, and sees that you’re planning for about 30 years. And in this case, 4% withdrawal, there’s usually a high probability of not running out of money.
However, you deserve more than general rules of thumb when you’re planning for your specific retirement. So it’s a good place to start, but please reach out to your retirement planner or someone you trust so you can get some of the specifics of your plan in place. There are some negatives to the 4% rule, but that’s a topic for another post.