Retirement Savings: How Much Is Enough?

KALAMAZOO, Mich. - Feb. 18, 2015 - PRLog -- To get a quick estimate, consider the "Rule of 25": Take the pretax amount you plan to withdraw from your portfolio and multiply it by 25. For example, if you believe you’ll initially need $40,000 in pretax income from your portfolio on an annual basis, you should have $1 million in your portfolio by the time you retire.

This is just a rough estimate, of course – many factors can influence your bottom line. If you plan to retire early and travel the world, for example, you’ll likely need more income than someone who works into his or her 70s and then stays close to home.

This is why working with your Edward Jones financial advisor is so important. He or she knows your situation and financial goals, and can help you tailor a strategy to achieve them. Then as you’re nearing retirement, sit down with your financial advisor to develop an income strategy for your portfolio. To learn more, contact your financial advisor today.

How Much Can I Spend?
Once you’ve retired, how much can you withdraw each year from your portfolio? The table to the right highlights our recommended ranges based on your age.

But keep in mind that there is no one rate or strategy that will work for everyone. Since your age and time horizon may be different, the withdrawal rate that makes sense for your situation may be different as well. Additionally, since your income needs (and investment performance) can vary over time, you may need to make adjustments to your withdrawal rate to remain on track.

Source: Edward Jones calculations. The above withdrawal rates assume an annual increase in withdrawals of 3% each year to account for inflation and can include the withdrawal of principal. If preservation of principal is a high priority, you will likely need to use a lower withdrawal rate. In general, the higher your withdrawal rate, the greater the risk that your money may not last throughout your time horizon. The above withdrawal rates are based on estimates and assume a diversified portfolio – 50% equities, 50% income – and a life expectancy to approximately age 90.

Your financial advisor knows your personal situation and can help you tailor a withdrawal strategy to fit your retirement lifestyle. To learn more or to schedule an appointment, call today.