Robin, Goose, or Ostrich? What Different Sized Eggs Mean to You

What do different sized nest eggs mean your financial security?  Having several hundred thousand dollars saved is a huge accomplishment, but do you know the sustainable annual income those savings will support?


Let’s take Abimelech:  He is aged 66 ish, eligible for his full Social Security benefit.  The average Social Security payment in 2021 was $1,658/month or about $19,900/year pre-tax.


If Abimelech retires this year with $300,000 saved, using a 4% withdrawal rate on investments, his beginning retirement income would be $31,900/year.


Starting retirement with the 4% withdrawal rate allows Abe to give himself raises through a 25-year retirement and accounts for low expected returns.


What if Abimelech had started saving very young, and very consistently and managed to put away $1,000,000?  Using the same formula, he would have an income of $59,900/year pre-tax.


Is this enough?  It depends on Abimelech’s spending.  If his mortgage payment is $2,000/month, there isn’t much left for even necessities in the first calculation.  Not much left for fun in the second example.  However, if Abimelech’s spending needs are lower, the $300,000 saved could be the perfect amount.


The point if this exercise is to translate a nest egg (whatever the size bird that laid it) to monthly income.  A person may spend $60,000/year, have $3,000,000 saved, $40,000/year coming in for Social Security and pensions, and worry about money needlessly.  Or a person may think a $150,000 inheritance at age 40 means early retirement.


Talk to a financial planner to get real about what your numbers mean in terms of your desired lifestyle.



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