Do you wonder how much is needed in your 401k to retire? Here is Gabe’s advice on some guidelines to follow for your 401k savings.
What Factors Determine how Much Money You Need to Save in Your 401k?
How much money you need in your 401k in order to retire is dependent on a few things. Firstly, how much money do you plan on spending per month? Then secondly, what your life expectancy may be.
If you retire at age 55 and you only need a $1000/month, then you may only need to save $500,000 in your 401k. However, if you are someone who retires at age 65 and wants $15,000/month, we are talking closer to a 2 or 3-million-dollar 401k. So, the age in which you retire as well as the amount you want to withdraw monthly are the most important factors in determining the lump sum amount needed in your 401k before retirement.
What is the Lifestyle you Want to Have in Retirement?
For example, if I have a half million dollars and I want a 4% withdraw rate, that’s $20,000 dollars a year, divided by 12 months works out to a little over $1500 a month that someone can expect to get out of there half million dollars. On the other hand, say you have 2 million dollars at a 5% withdraw rate, that’s $100,000 dollars a year or $8,000 dollars a month. What kind of life do you want to be living in retirement?