The Secret to Never Running Out of Money in Retirement: Part 2

| June 28, 2014

I declared starting a business in retirement was the secret to never running out of money in retirement. Let me do a quick math lesson with you to prove my theory.

Lets say you have $250,000 in your 401K and or other retirement account. Let me follow this up with 98% of Americans at age 65 have less then 10k. I am going to use 250,000 though to show even a person who has done a much better then average job of accumulating a nest egg.

If you have 250,000 and you received 5% return on this investment each year that you took in a withdrawal you would receive – $12,500 per year. These does not take into account deferred income tax or capital gains. It is safe to say at least 20% of your withdrawal will be paid in taxes. Your net now become $10,000 or slightly more then $800 per month.

So if you had $500k put aside $1700 or so a month to live on.
You did incredible and you have a million put away so you now have $3,500 or so to live on per month.

When you really start looking at it closely it not a lot of money and that is why retirees are so afraid to spend it. If the market crashes in way this 5% which was already highly optimistic is much lower.

Next week- part 3 on our attempt to solve the problem of “How to never run out of money in retirement”. See more info and resources at our website

Sean Casttrina


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