This week, I’m talking about whether or not $1 million is going to be enough for a comfortable retirement.

Yesterday, we determined from the 4% rule for retirement withdrawals, that $1 million in retirement can provide about $40,000 in income in year one of retirement. 

Today, we need to take the next step in figuring out if $1million is enough in retirement by looking at your other income sources in retirement and your income needs.

If you’re like most Americans, $40,000 from a million dollar portfolio will not provide for your lifestyle in retirement.

The average retiree lives off of about $65-70,000 in retirement, so we already have a shortfall. Depending on how much you want to travel and how much you enjoy eating grass-fed beef, you may need more or less than that. 

The good news is for most of you, you’ll have other sources of income, namely Social security. You may also have a pension or some other source of income in retirement like a rental property. It’s important to add up these other income sources to estimate your total income stream in retirement. 

Let’s say after combining your $1 million portfolio with your other income sources, you can generate $70,000 a year in income. Next, you’ll need to figure out if that’s enough. 

Based on your desired lifestyle and spending, can you live off of $70,000 a year or whatever that number ends up being? I can’t emphasize enough that you’ll want to do this exercise starting in the last 10-15 years before retirement, a repeat the exercise annually so you can course-correct when necessary before you get to the end of your working years.

That’s it for today. Tomorrow I’m going to talk about taxes, which I have so far left out of our discussion this week, but it’s an essential component to determining how far $1 million will take you in retirement. 

Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip.

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