Key Points
When people start thinking about retirement, they come at it from a number of different angles. They might wonder if they can retire at a certain age; we’ve written about how to retire at 50 and at other ages. Or they might simply wonder at what age they can retire given their current savings and spending habits.
There’s another way into the conversation. As people who have been thinking about and planning for retirement for a while get closer to their anticipated retirement date, they start to have a decent idea about what their investment balances at retirement might look like. And it’s natural to wonder how long that balance might last.
Running The Numbers
So how long will $2 million last in retirement?
Let’s consider a hypothetical couple that is 60 years old and hoping to retire, like, yesterday. As soon as possible, for sure. They have $2 million saved and think they are probably ready, but want to be as certain as they can be. Their investments are roughly made up of 60% stocks (averaging around 7% annual returns) and 40% bonds (averaging 3% annually). Three quarters of their investments are in IRAs. They’re hoping not to take Social Security–a combined amount of about $50,000–until full retirement age.
On the expense side of things, their home is paid off, and they think a conservative (high) estimate of spending will be $80,000 annually, pre-tax.
We ran these numbers, along with an assumed annual inflation rate of 2.5%, through the WealthTrace Retirement Planner. (You can do the same via a free trial of the program.) Let’s see how things look for them:
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