How Long Will My 401(k) Last?
Estimating your post-retirement expenses and how much you’ll need to save in your 401(k) can be challenging, but it’s an important part of the retirement planning process. While the answer will vary from person to person, several key factors influence how long your retirement savings will last, such as monthly expenses, investment returns, inflation, and unexpected costs.
Below, we explore these factors in more detail and outline some helpful saving strategies to keep you financially flexible and proactive in retirement.
Key Considerations When Saving
Projected Monthly Expenses
Estimating your future expenses before retirement can give you a clearer picture of how much you’ll need to withdraw each month. Common costs include mortgage or rent, groceries, insurance, healthcare, and more.
Potential Rates of Return on Investments
Looking at your historical average returns can help estimate future growth. As retirement approaches, consider adjusting your asset mix to reduce risk—retirees typically have a lower risk tolerance.
Inflation
Inflation can erode your purchasing power over time by increasing the cost of goods and services. While it’s difficult to predict, maintaining a diversified investment portfolio can help hedge against it.
Unexpected Costs
Unexpected expenses—like medical emergencies or home repairs—are common in retirement. Planning for these by setting aside emergency savings can help you avoid financial setbacks.
Key Strategies When Saving
Adjust Your Withdrawal Rate
A sustainable withdrawal strategy helps ensure you’re not depleting your 401(k) too quickly. It should support your lifestyle both now and in the future.
Budget Your Expenses
Creating a detailed budget helps you identify where you can cut costs. For example, canceling unused subscriptions can lead to more efficient spending and better financial discipline.
Diversify Your Income Sources
Consider supplementing your retirement income with part-time work or freelancing in an area you enjoy. This not only eases financial pressure but can also add structure and fulfillment to your retirement life.
If you’re interested in getting personalized guidance on how to make your 401(k) last or would like help implementing these strategies, schedule a complimentary meeting today.
