How long will $300,000 last in retirement? The answer to this depends on several factors: your lifestyle, your lifespan, your investments, and any other income you have, for starters. Let’s see if $300,000 is enough for your retirement and some tips you can use to stretch your retirement dollars. A financial advisor can help you plan and save for your retirement.
How long will $300,000 last in retirement?
To make $300,000 last in retirement, you have to be smart with your money. While it’s not impossible, it’s not ideal either. Here are some fictional examples of how this might play out.
Example 1: Modest life
Edie and Jim are both 68 and own their own home in Akron, Ohio. They worked and saved together. Together, they receive $48,000 a year in Social Security Income (SSI). Through smart investments, their $300,000 sits in a portfolio that is earning 6% per year. This means that their portfolio produces $18,000 in the first year. They make monthly withdrawals of $1,000 to cover living expenses, or $12,000 annually, a 4% withdrawal. At this rate, their portfolio will grow by $6,000 in the first year, and grow steadily thereafter.
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Combined with SSI, that puts their annual income at $60,000. That’s enough for Edie and Jim to live comfortably, but they don’t take long trips or make big purchases. It also does not take into account rising costs due to inflation, large and unexpected costs and taxes. On the other hand, if they can continue to live affordably, they can estimate that their savings of $300,000 will last about 25 years.
Example 2: Out of means
Sal and Pat live in Pensacola, Florida, where they have a mortgage on a condo. They are the same age as Jim and Edie and receive the same SSI. However, since their investment portfolio is conservative, it only offers a return of 4%, or $12,000 per year. Due to their higher expenses, they withdraw $3,000 per month, or $36,000 per year. This means that they withdraw a deficit of $24,000 each year. That’s a high 8% withdrawal rate, double the 4% rule of thumb that guides many retirees.
At this rate, without additional investment or reduction in spending, their retirement savings will run out around age 13. It’s not a solid retirement savings plan. To make their savings last, they will have to drastically reduce their expenses or find an additional source of income or both. For example, if they had part-time or freelance jobs and were able to reduce their withdrawal to $1,000 per month, even if it was only for a few years while they were downsizing, this could prolong considerably the duration of their savings.
How to make your retirement savings last longer
If you want to retire with $300,000 in your accounts, there are definitely ways to do it. You should seek to maximize what you have while minimizing costs. Here are some simple ways to make your retirement savings last longer.
Have additional income
Supplementary income is part of most people’s retirement plans. When you retire, you go from one main income stream to multiple streams. These include your retirement savings, SSI, pensions, annuities, and other sources of income.
For many people, retirement does not mean that they stop working altogether. In fact, many people like to work in a small capacity. Whether it’s a part-time job, self-employment or consulting, work brings in money, but also mental and social stimulation.
Another source of additional income is passive income through investments. For example, let’s say you own real estate. You can receive passive income in the form of regular monthly rents. The amount you receive depends on the maintenance costs of the property, the value of the property and the attractiveness of the location.
retire later
Another option for stretching your retirement savings is to retire later. If you retire at 70 instead of 60, you have generated 10 additional years of income and savings. It’s also 10 years of not having to worry about living on your retirement savings. Keep in mind, however, that working full time later in life can get harder and harder with each passing year. You will have to find a balance between the quality of your life and the need to delay your retirement.
Reduce
Fortunately for many, retirement can really make things easier. You no longer have to keep up with the hubbub of your career, and if you have kids, they’re most likely out of the house. This makes it the perfect time to downsize. If you own your own home or have a lot of net worth, cashing in on that asset might be a good idea. Downsizing to a smaller, more affordable home can put a lot of money in your pocket. You can invest this money and use the returns to bolster your retirement savings.
Put your money in investments with reliable returns
Several types of investments can generate returns. Some are riskier than others, but a diversified investment portfolio can still make room for them. Here are some investments known to generate returns:
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Annuities: Annuities are contracts you enter into with insurance companies. In return for your investment, the insurance company pays you a guaranteed amount, usually monthly. There are different types of annuities, with different risks and returns. In general, this is one of the safest investments you can make. Remember that the insurance company only makes these payments while you are still alive.
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REITs: Real estate investment trusts are corporations that own and operate real estate. Legally, they are required to pay 90% of their profits to shareholders. This means that if you invest in well-managed REITs, you will see returns for many years. However, if a REIT is mismanaged or there is a major shake-up in real estate, the investment could be at risk.
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High Dividend Stocks: Dividend stocks are a type of stock that regularly pays money to investors. These payments can vary from 1% to 4% of your investment. Check out our list of 10 stocks that pay high dividends.
Conclusion
How long will $300,000 last in retirement? It all depends on your expenses, your lifestyle, your investments and your additional income. Depending on where you are and how you live, it is possible to make it work. There are several steps you can follow – such as downsizing or postponing retirement – to stretch your retirement savings.
Tips for getting the most out of your retirement savings
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If you’re unsure how much you should save or how to invest, consider talking to a financial advisor. SmartAsset’s free tool connects you with up to three vetted financial advisors who serve your area, and you can interview your advisors for free to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, start now.
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Wondering how much you should contribute to your 401(k)? SmartAsset’s free 401(k) calculator will help you estimate how much you should have in retirement and how much you should be saving.
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If you don’t have a 401(k) or want a more complete picture of your retirement savings, use SmartAsset’s Retirement Calculator to get a solid estimate of how much you need to save.
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