How Long Will $400k Last in Retirement?

Data from the Federal Reserve shows that the median savings in the United States at retirement age is roughly $200,000. So, if you have $400,000 at retirement, you’re doing better than most, but how long will your money last? The answer will depend on your investment allocation, spending habits and other income streams. Here are some tools to help you determine your available assets and desired expenses so you can live the retirement you want on $400,000.

A financial advisor can help you create a financial plan for your retirement needs and goals.

How to Determine Your Assets and Available Income Streams

Knowing what you have available to you will have a huge impact on how long you can reasonably expect your money to last. Every source of income you can have in retirement will reduce the amount you need to withdraw from your portfolio. Sources of potential income can include:

Social Security benefits
Pensions
Part-Time Income
Rental income
Royalties
Dividend income
Interest income
Inheritances
Profit from selling a business or property

In addition to your $400,000 in retirement accounts, you may also have assets that can be used to supplement your income at a later date. Assets can include:

The equity you have in your home, which could be refinanced to reduce your mortgage or sold to purchase a smaller home in a lower-cost-of-living area to reduce your expenses.
Other real estate properties that could be sold or rented such as vacation homes.
A second vehicle that could be sold if your household no longer needs two in retirement.
Recreational equipment like travel trailers, ATVs, Snowmobiles and boats could be sold or rented when you’re not using them.

Taking a thorough stock of your assets can help you determine where your values lie and discover new income streams. Maybe you want to keep your family’s winter cabin until your youngest graduates. Determining what you’d like to sell and when can help you plan for your current and future expenses.

Determine Your Desired Expenses

SmartAsset: How Long Will $400k Last in Retirement

You’ve worked your entire life, and now it’s time to reap the rewards. While you want to make sure that future you is cared for, you also need to enjoy what you’ve worked for.

The realities of aging are hard to face, but there may come a time when you can no longer climb into a gondola to be rowed through Venice or go on a whitewater rafting trip. The time to complete your bucket list isn’t when you’re wheelchair-bound in your nineties, but when you’ve finally got the time, money and health to enjoy it.

Splurge a little, but keep track of what you’re spending and make sure it’s on what truly matters to you most. Balancing your desires for a rich life in your sixties shouldn’t come at the cost of being unable to afford home health care in your eighties.

Traditionally, financial advisors have agreed that the average retiree will need to replace 80% of their pre-retirement income with savings and Social Security benefits. However, new research from the University of Michigan’s Retirement and Disability Research Center suggests that retirement spending declines over time across all socioeconomic levels.

You still need to keep money set aside, but you may not need to anticipate spending 80% of your pre-retirement income every single year of retirement.

Find a Safe Withdrawal Rate

Determining a safe withdrawal rate from your investments for their long-term use can be difficult. Expert opinions vary, but one widely accepted safe withdrawal rate follows the 4% rule, which was created based on the Trinity study published in 1998.

The rule essentially states that you can withdraw 4% annually from a well-diversified retirement portfolio, adjust your 4% every year for inflation, and expect your money to last for at least 30 years.

Using our portfolio of $400,000 and the 4% withdrawal rate, you could withdraw $16,000 annually from your retirement accounts and expect your money to last for at least 30 years. If, say, your Social Security checks are $2,000 monthly, you’d have a combined annual income in retirement of $40,000.

That may not be enough for your current lifestyle, so you may have to consider readjusting your priorities and expenses. If readjusting your expenses isn’t possible, liquidating assets, developing rental income streams, or finding meaningful part-time work may be necessary.

If you withdraw too much from your portfolio at the beginning of retirement, your investments won’t be able to grow and your available assets at the end of retirement will be impacted significantly. While you can expect to spend less later on, you’ll still want to be careful. Working with a financial advisor can help you see the individual impact of large portfolio withdrawals now on your financial health long term.

Tips for Making Your Retirement Savings Last Longer

Planning for retirement is a crucial step in ensuring financial security during your golden years. Making your retirement savings last longer requires strategic planning and informed decision-making. Here are some practical tips to help you stretch your retirement funds and enjoy a comfortable lifestyle.

Create a Detailed Budget: Establishing a comprehensive budget is essential for managing your retirement savings effectively. By tracking your expenses and income, you can identify areas where you can cut costs and allocate funds more efficiently. This proactive approach helps prevent overspending and ensures your savings last longer.
Diversify Your Investment Portfolio: Diversifying your investments can protect your savings from market volatility. By spreading your investments across various asset classes, such as stocks, bonds, and real estate, you reduce the risk of significant losses. A well-balanced portfolio can provide steady growth and income throughout your retirement.
Delay Social Security Benefits: Postponing your Social Security benefits can significantly increase your monthly payments. For each year you delay benefits past your full retirement age, your benefits increase by a certain percentage. This strategy can provide you with a higher income later in life, helping your savings last longer.
Consider Part-Time Work: Working part-time during retirement can supplement your income and reduce the need to draw from your savings. This additional income can cover daily expenses, allowing your retirement funds to grow or remain intact for future needs. Plus, part-time work can provide social interaction and a sense of purpose.
Review and Adjust Your Withdrawal Rate: Regularly reviewing your withdrawal rate is crucial to maintaining your savings. A common rule of thumb is the 4% rule, but personal circumstances may require adjustments. By carefully managing your withdrawal rate, you can ensure your savings last throughout your retirement.

By implementing these strategies, you can make your retirement savings last longer and enjoy a financially secure retirement. Remember, the key is to plan, stay informed, and make adjustments as needed to align with your financial goals.

Bottom Line

Determining how long $400,000 will last in retirement is a crucial consideration for anyone planning their financial future. The longevity of your retirement savings largely depends on several factors, including your lifestyle choices, healthcare needs and investment strategies. Ultimately, careful planning and regular reassessment of your financial strategy are essential to ensure that your retirement savings last as long as you need them to. By staying informed and adaptable, you can better navigate the complexities of retirement planning and enjoy a financially secure future.

Retirement Planning Tips

A financial advisor can help you create a financial plan for your retirement needs and goals. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with 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.
If you want to know how much money you will have by retirement, SmartAsset’s free calculator can help you get an estimate.