Achieving your retirement goals takes a proactive approach. If you start planning for retirement early, the better off your retirement will be in the future. If you are approaching retirement, there are many strategies available to help you make the most of your retirement. A common question we get asked is “When can I retire?” and “How much can I spend in retirement?” It really depends on your situation. In the scenario below, we walk through the answers to those two questions.
Our clients today are Frank and Joanna Miller. The Millers have about $1 million saved. Frank is 51 years old and Joanna is 50. They’re planning on retiring at age 65 and they’re planning on spending about $150,000 a year in retirement. Looking at the below lifetime portfolio value chart, right away we can see that the Miller’s are projected to run out of money a good deal before the end of the plan. We can gather that their current plan of working till 65 and spending $150,000 in retirement is probably not the best idea.
The Miller’s have a couple of options they can control – when they retire and how much they spend in retirement.
In order to fund their plan through retirement, the earliest they can retire would be at age 69 for Frank and 68 for Joanna.
Alternatively, we can look at the maximum amount they can spend in retirement. We can see here that if they reduce their retirement spending from $150,000 a year to $126,000 a year, they would fund their plan through retirement.
However, maybe there’s no way they want to work the additional years or there’s no way they can reduce their expenses by $24,000. If they are comfortable working until age 67, they would need to reduce their expenses by $11,000 a year.
By planning in advance, you can make minor changes today so that you can reach your life goals while feeling confident about your finances.