We work our tails off saving for retirement, putting away as much as we can for years. It seems like we'll never get to use any of the money--and then one day we actually retire.
Now we're faced with the dilemma of how much we can spend during retirement--how long will savings actually last?
Experts suggest planning to withdraw about 4% of a nest egg each year. A million-dollar nest egg yields about $40,000 per year. With Social Security and other resources, is that enough?
Imagine what you want your retirement to look like. Money, work, health, housing, and lifestyle all will factor into your retirement. The National Endowment for Financial Education (NEFE), Greenwood Village, Colo. recommends asking yourselves these questions:
Like predicting how long you'll live, trying to anticipate inflation over the next 20, 30, or even 40 years isn't an exact science. And what may look like a hefty retirement account now may shrink substantially down the road because of inflation.
Deciding if you can afford to retire is personal and the answer is different for everyone. The best strategy is to do your homework and determine how much money you need to set aside to pay for the retirement lifestyle you want. By planning and investing now, you can be on the way to building the nest egg you'll need.
This calculator can help forecast how much you can withdraw each year--and for how long. But it's just one tool. Plug in your starting balance, number of years the savings should last, expected annual after-tax return, and the expected inflation rate. And, talk to a financial planner or the professionals at your credit union for further information about using your retirement savings.
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