The idea of retiring can be scary, and understandably so. After all, you’re going from earning a steady paycheck to having to live off of savings. That’s a big shift.
But if you have a lot of money saved for retirement, that should help you feel more comfortable with that life change — even if you’re ending your career a little bit on the early side.
In this Reddit post, we have someone who’s 59 years old with more than a $6 million net worth. They figure they’ll need $10,000 to $12,000 a month in retirement, but they’re worried about running out of money after having quit their job.
I think the poster is in a good financial position. But they may need a little help seeing that.
It’s a matter of crunching the numbers
When I worry about being able to afford something, I run the numbers to either ease my anxiety or confirm it. That’s what the poster should do here.
They seem to have already set a retirement budget of $10,000 to $12,000 a month, which is a smart thing to do. Now, they need to see if their savings will allow for it.
Because the poster is retiring a bit early, the popular 4% rule may not work for them. That rule is designed to make savings last for 30 years. But with good health, the poster might need their nest egg to last longer. A 3% withdrawal rate may be more suitable for them.
In that case, 3% of $6 million is $180,000. When we divide that by 12 months, we get $15,000. The poster says they need $10,000 to $12,000 per month in retirement, so that’s already $3,000 more than the maximum amount they think they need.
Granted, the poster might need $12,000 a month after tax, and their withdrawals may be taxable. But even so, because they can take out $15,000 a month, they’re building in some room for taxes. And it may be that some of their withdrawals can be taken tax-free.
Plus, none of these numbers account for Social Security.
The poster was making $250,000 at the time they quit their job at 59. This means they’re likely eligible for a very large monthly Social Security check. And even if their spouse never worked, Social Security should pay a spousal benefit that only adds to their household income.
So all told, it really does look like the numbers work.
It’s a good idea to consult a professional
Even though I think it’s pretty clear that the poster is in a great position to retire without having to worry about money, I’d suggest that they talk to a financial advisor. These calculations might mean a lot more coming from a professional who helps people plan their financial future.
Plus, a financial advisor can help the poster make adjustments to their portfolio as necessary to account for the fact that they’ll be taking withdrawals imminently. That could mean reducing some risk or shifting into more assets that produce reliable income.
Top Gaining Stocks
Top Losing Stocks