Personal Finance

Here Is What You Need to Invest to Have $75,000 Per Year in Retirement

Ian Cooper

Published: October 4, 2024 1:23 pm

If you’re thinking about retiring, make sure you have a comfortable cushion.

Let’s say you want to earn at least $75,000 per year in your retirement. Following the 4% rule, you need a nest egg of about $1.875 million. That rule suggests that if you withdraw 4% from your retirement each year, it should last you about 30 years. For example, if you want or need $50,000 per year, your nest egg should be about $1.25 million. For $75,000, your nest egg should be about $1.87 million.

And if you need or want to pull in about $100,000 per year, your nest egg should be around $2.5 million.

However, that doesn’t assume taxes or fees, which are paid from money withdrawn. 

Still, your goals are doable, especially if you start early, get aggressive with what you’re putting away at the moment, and even take advantage of any employer matches.

Key Points About This Article

• If you’re thinking about retiring, make sure you have a comfortable cushion.
• Using the 4% rule, if you want access to $75,000 a year, you need a nest egg of about $1.875 million. If you need or want to pull in about $100,000 per year, your nest egg should be around $2.5 million.
• Also: Take this quiz to see if you’re on track to retire ^(Sponsored)

Begin with the End in Mind

As you near retirement, “begin with the end in mind,” as noted by Stephen Covey, author of The 7 Habits of Highly Effective People.

That includes the consideration of how much you need to spend every year on rent or mortgage unless you’re one of the lucky ones who have paid off your mortgage, healthcare and long-term costs, groceries, medication, transportation costs, and perhaps even pet expenses. Plus, do you expect to travel a lot, and how much do you foresee spending? Maybe you have plans to help your children, and even their children with things such as college tuition.

That’s not an exhaustive list, but a general idea you may want to keep in mind.

You also want to consider how much you may receive from Social Security, which could lower what you plan to pull from retirement every year if you choose to abide by the 4% rule.

Contribute to an Individual Retirement Account (IRA)

An Individual Retirement Account (IRA) allows you to save for retirement with tax-free growth or on a tax-deferred basis.

You can invest in a traditional IRA, for example. While it’s best to check with your financial advisor, many times you can deduct contributions on your tax return.

There’s also the Roth IRA, where you make contributions with money you’ve already paid taxes on. With a Roth IRA, your money can grow tax-free with tax-free withdrawals. But again, check in with your financial advisor before doing anything.

Or, if you’re self-employed, look into the Solo 401(k), a variation of the 401(k) plan but specifically set up for those who work for themselves.

Also, for 2024, the IRS says you can contribute up to $69,000 with an additional catch-up contribution of $7,500 if you’re 50 or older.

And if you have an employer that will match your 401(k), maximize your contributions up to the amount your employer will match. If your employer will match up to 6% of your salary, maximize that. To really build your wealth using that employer match,  start early with your employer, even if you can only afford to invest 1% of each check into retirement. If you earn $75,000 a year, and you contribute 1%, that’s $750 for retirement. If your employer matches that, you have $1,500 for retirement per year. If you contribute 6% and your employer matches that, that’s about $6,750 in retirement per year.

Delay Social Security

Choosing the right time to retire and to receive retirement benefits is essential.

While that can depend on variables such as a shortfall in retirement savings, health, current income, and other financial needs, a delay in receiving social security can be beneficial.

For one, according to the Social Security Administration, “If you have reached full retirement age, but are not yet age 70, you can ask us to suspend your retirement benefit payments. By doing this, you will earn delayed retirement credits for each month your benefits are suspended which will result in a higher benefit payment to you.”

Two, according to Kiplinger.com, “For every year you delay taking your Social Security benefits past full retirement age, you get a bump of 8% in your benefit until age 70. For example, if you’d receive $1,000 per month at your full retirement age of 66, delaying your benefits to age 70 would boost your monthly check to $1,320.”

It’s just something to keep in mind if you’re looking to pad what you receive for retirement.