How Much to Withdraw from $2 Million in Retirement Savings
Overview
Retiring with $2 million in savings places you well above the average American retiree. Understanding how your savings compare and determining an appropriate withdrawal strategy are crucial for a comfortable retirement.
Comparison to Average Retiree
According to the Federal Reserve, the average retiree has approximately $255,200 in retirement savings. However, retirement savings vary significantly based on age:
* All families: $333,940
* 55-64 years: $185,000
* 65 years: $200,000
* 75 years and older: $130,000
Withdrawal Strategies
Several methods can be used to determine your annual withdrawal amount:
* Average Expenses: Retirees typically spend around $49,279 per year, declining with age. Consider your current expenses and lifestyle needs to estimate future spending.
* 80% Rule: This suggests withdrawing 80% of your pre-retirement income, assuming reduced expenses and increased healthcare costs.
* 4% Rule: Withdraw no more than 4% annually to ensure your savings last 30 years, adjusted for inflation. For $2 million in savings, this equates to $80,000 per year.
* Financial Advisor: A professional can provide personalized recommendations based on your specific situation.
Additional Considerations
* The 4% rule assumes a 60/40 stock/bond portfolio and consistent spending.
* Changing market conditions and spending patterns may impact withdrawals.
* Consider reducing expenses, investing for additional income, delaying retirement, or part-time work to supplement savings.
Conclusion
Retirement savings are highly individualized. Determine your savings and withdrawal strategy based on your unique circumstances, considering factors such as health, lifestyle, and financial goals.