Getting a head start on saving for retirement is a good idea if you want to be able to enjoy a comfortable lifestyle. However, that’s not always realistic and it’s possible that you might be retiring with a small amount of money instead. For example, you might only have $150,000 or $200,000 saved. How long with $150K last in retirement? The answer can depend on different factors, including your retirement age, lifestyle and life expectancy. Connecting with a financial advisor can make it easier to create a workable retirement savings plan.
Can You Retire With No Money?
Retiring with no money in savings isn’t unheard of, though it can be exceptionally hard to do. Without supplemental savings or other sources of income, you may be relying solely on Social Security benefits to cover retirement expenses.
Even if you’re maxing out Social Security benefits, you could still fall short when it comes to covering basic cost of living expenses. Factor in higher inflation rates and increased spending on health care as you age and Social Security might not go very far at all.
If you’re in a situation where you expect to retire with little to no money, then it’s important to have a game plan. That can include knowing how to maximize Social Security benefits, choosing the right Medicare coverage to reduce your out-of-pocket costs for healthcare and possibly applying for Medicaid benefits if you’re eligible.
Retiring with no money can also mean making drastic cuts to your budget or lifestyle changes that allow you to live on less. For instance, you might downsize your home or move in with one of your adult children to lower your cost of living. Or you may consider taking out a reverse mortgage to create an additional stream of income in retirement.
How Long Will $150,000 Last in Retirement?
Saving $150,000 is no small feat but that money may not go as far as you expect in retirement. How long $150K will last can depend on several things, including:
- Your retirement age
- Investment returns
- Monthly withdrawals
Let’s say, for example, that you withdraw $1,000 in savings each month to supplement your Social Security benefits. You earn a 6% annual return on your savings. In that scenario, you could expect your savings to last approximately 23 years.
That might not sound too bad, but it doesn’t account for your tax rate, inflation or any changes to your withdrawal rate. If you need to use up more of your savings to pay for increasing health care costs each month, for example, that will cut down the timeline.
For instance, say that instead of $1,000 you’re withdrawing $1,500 from your savings each month. A strong market means that you’re now earning a 7% annual return, which is good. However, now your savings will last just under 13 years because you’ve increased the withdrawal rate.
Of course, you could stretch your money further if you’re more conservative withdrawals. Say you only withdraw $500 a month from savings and earn a 5% annual return. Even with the lower rate of return, you’d never have to worry about running out of money at that withdrawal rate.
How Can I Retire on $150,000?
Most financial experts recommend saving $1 million for retirement and some might even bump that up to $2 million. Whether $150,000 is enough for you to retire or not is specific to your situation.
Some of the things that can determine whether you can retire on $150K include:
- The timing of when you plan to retire and your life expectancy
- Your preferred retirement lifestyle
- Your overall health and how likely you are to remain healthy
- Where you live and your cost of living
- Your tax bracket
- Your estimated Social Security benefits
- Other sources of income you may be able to tap into
If you’re naturally frugal and you plan to live a low-key, minimalist lifestyle in retirement then $150,000 might serve you well. On the other hand, if you’d like to enjoy a more lavish lifestyle or you have a serious health issue that results in high out-of-pocket costs, $150,000 may not go that far at all.
Some factors may be out of your control when it comes to making the most of retirement savings. Rising healthcare costs and inflation are at the top of the list. When health care gets more expensive, more of your budget may go to covering co-pays, medications or anything Medicare doesn’t pay for. Likewise, rising prices for consumer goods can make everything you buy more expensive.
Taxes you have some control over, as you can take steps to mitigate your tax liability. But it’s virtually impossible to avoid them altogether.
How to Make $150,000 Last in Retirement
If you’ve saved $150,000 for retirement it pays to be strategic about how you use that money. The more you can do to make that money last, the less likely you are to run through your savings too quickly. Here are a few tips for stretching your retirement savings.
- Reduce your cost of living: Cutting expenses means you have less need to spend down savings. You can start with your largest expenses first, which may include housing or health care, then work your way down the list to see where you can reduce or cut out altogether. You might also consider a move to a cheaper area.
- Decide when to take Social Security: Social Security benefits can make you less reliant on your savings in retirement, but it’s important to get the timing right. Technically, you can begin receiving benefits at age 62 but that’ll mean less money you collect. Waiting until age 70, on the other hand, can result in an increased benefit amount.
- Look for additional income streams: Aside from Social Security, you have some other options for creating retirement income. For example, you might get a part-time job or start a side hustle. Or as mentioned, you might get a reverse mortgage on your home. You can also look for any “lost” retirement accounts you forgot about, like an old 401(k) or pension.
- Withdraw from savings strategically: If you have money saved for retirement in a 401(k), IRA or taxable account, the order that you draw them down matters. As a general rule of thumb, it’s best to start with the least tax-efficient accounts first, which are usually taxable brokerage accounts. Next, you’d empty out tax-deferred accounts, like a 401(k) or traditional IRA, leaving tax-free accounts last. That would give the money in your Roth IRA the most amount of time to grow tax-free.
A financial advisor might be able to offer more tips on how to make the most of $150,000 in retirement savings. You can also ask an advisor what else you might need to include in your retirement plan, like life insurance or long-term care insurance.
Saving $150,000 for retirement may be your goal or it might just be a smaller milestone you’re aiming for as you work toward a larger savings number. Either way, it’s helpful to know how long you can expect $150K to last in retirement as you shape your savings plan.
Retirement Planning Tips
- Managing your tax liability is another smart tip for preserving your retirement savings. Your financial advisor can guide you through the pros and cons to help you decide if it might be right for you. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Purchasing an annuity is another possibility for creating a supplemental stream of retirement income. Annuities are insurance contracts that allow you to pay a premium upfront, then collect payments at a later date. You can choose from an immediate annuity or a deferred annuity to fund retirement. Your advisor can walk you through the different types of annuities, how to compare them and what you might pay in fees.
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