When to Retire

Only 4 in 10 individuals have done a retirement needs calculation.

Source: Employee Benefit Research Institute, “Retirement Confidence Survey”, 2001

Before you can make any decisions about withdrawing money from your retirement funds, it helps to look at how long a retirement portfolio might last.

The answer depends on several variables — such as the original value of the portfolio, future inflation, the annual returns, your risk tolerance and time frame, and the annual withdrawals.

Think of this in the context of how long you can expect to live, and you’ll see how important it can be to help make sure that your money lasts throughout your lifetime.

Length of Retirement

At age 65, a healthy individual may expect to spend 20 years or longer in retirement.

Source: Society of Actuaries, 2019

The length of your retirement will affect how much money you can spend and the lifestyle you will enjoy.

With recent advances in technology and medicine, life expectancies are stretching considerably, and chances are good that you’ll be spending a large portion of your life in retirement.

It’s not unreasonable to expect that a healthy 65-year-old retiring today and in the next couple of decades will spend 20 to 30 years in retirement.

Thus, the way in which you structure multiple income sources and juggle distributions from your savings and retirement plans — and the ongoing performance of your investments — will help determine whether you will have the money necessary to fund a long retirement.

Income Planning

You will probably need at least 70% to 80% of your
pre-retirement income to live comfortably in retirement. 

The retirement lifestyle you envision will also have an impact on your savings accumulation. For example, you may plan to travel extensively, be involved in philanthropic endeavors, or maintain a membership at the local country club.

Considering these and other potential retirement expenses, such as rising health-care costs, you will probably need at least 70 percent to 80 percent of your pre-retirement income to live comfortably in retirement.