{"id":28430,"date":"2020-02-21T05:07:35","date_gmt":"2020-02-21T13:07:35","guid":{"rendered":"https:\/\/goldco.com\/?p=28430"},"modified":"2023-10-26T05:53:40","modified_gmt":"2023-10-26T12:53:40","slug":"much-will-retirement-account-pay-monthly","status":"publish","type":"post","link":"https:\/\/goldco.com\/much-will-retirement-account-pay-monthly\/","title":{"rendered":"How Much Will Your Retirement Account Pay You Monthly?"},"content":{"rendered":"

It can be tempting to look at your 401(k), IRA, TSP, or other retirement account and think that you\u2019ve got it made. Maybe you have $100,000 in your account, or $250,000, or maybe you\u2019re one of those lucky ones with over $1 million. But rather than thinking of the lump sum in your account, have you thought about how much that account will net you each month in retirement?<\/p>\n

If you have a traditional (non-Roth) IRA or 401(k) retirement account, you\u2019ll have to pay taxes on your distributions from your account. And if you have any additional income coming in, such as Social Security, a pension, or other investment income, that could bump you up into a higher tax bracket.<\/p>\n

You also have to remember that inflation will eat away the purchasing power of your investments over time. Since you could very well live 20 or 30 years in retirement, your cost of living could easily double over the course of your retirement, further eating away at your savings.<\/p>\n

The recently passed SECURE Act has ushered in a number of changes to retirement accounts<\/a>, among them changes to required minimum distributions, disbursement of inherited IRAs, and eliminating age limits on some IRA contributions. But the new law is also requiring retirement plan sponsors to provide investors with the projected monthly income that would result from their investments.<\/p>\n

Rules and regulations surrounding that information have yet to be formulated, as differing assumptions can result in differing figures. But providing that information will give many investors at least a ballpark figure for how much money they can expect their retirement accounts to provide them in retirement.<\/p>\n

If you\u2019re interested in calculating for yourself how much you can expect per month in retirement, or how long your retirement savings will last, there are four important factors that you need to take into account.<\/p>\n

1. Return on Investment<\/p>\n

When you retire, you won\u2019t be turning your retirement savings into cash overnight. For one thing, cash is a lousy investment, guaranteed to lose you purchasing power each year due to inflation. For another thing, taking distributions from your retirement accounts will result in a tax liability, which you want to avoid as much as possible.<\/p>\n

Your retirement savings need to keep working for you into retirement, but like many people you\u2019ll probably want to adjust your risk profile so that you\u2019re not taking a gamble with your funds. That means drawing down your holdings of stocks and risky bonds, and investing in gold<\/a>, silver, or other stable hedges.<\/p>\n

When it comes to planning your retirement income<\/a>, the makeup of your investment portfolio will determine your overall return. Because your portfolio is less risky, you\u2019ll likely make a lower return than when you were working, but you still want to make sure that you get a positive return after adjusting for inflation.<\/p>\n

2. Inflation<\/p>\n

Inflation isn\u2019t a natural occurrence, but it\u2019s the natural result of central banks creating more and more money. As they continue to pump money into the economy, prices rise. And while official inflation figures are at 2% or less, the actual rise in the cost of living for many American households is far more.<\/p>\n

That increased cost of living will become even more pronounced in retirement, as your healthcare costs will begin to increase significantly. So despite government figures proclaiming inflation to be low, your actual household inflation rate could be 4-5% or more. That\u2019s something you\u2019ll have to figure in to your retirement planning.<\/p>\n

3. Lifespan<\/p>\n

The amount of time you live after retirement will play a big role in how much monthly income your retirement accounts will pay out. If you die five years after retirement, you obviously won\u2019t have much time to dip into your savings. But if you live for 40 years after retirement, you\u2019d better hope that you\u2019ve either saved enough to survive, or that your children are prepared to assist you.<\/p>\n

The average 65-year-old man today lives another 19 years, while the average 65-year-old woman lives 21 years. So figure that your retirement savings will have to last you at least 20 years. Even better, assume that they\u2019ll have to last you 25 years. It never hurts to be too conservative in your financial planning. Once you\u2019ve established your potential lifespan, you can begin to calculate how much monthly income your retirement accounts will bring.<\/p>\n

4. Spending<\/p>\n

While rate of return, inflation, and lifespan are out of your control, spending is largely within your control. Obviously expenses like healthcare will be largely dependent on other factors, but you can control expenses like food, clothing, housing, and travel.<\/p>\n

This is where you figure out if you still need that large house you bought when you were raising children, or if you still need two or three cars. And while you may do some traveling when you first retire, as you age you may no longer feel the same desire to travel, or you may not be physically able to travel as you once did. If you\u2019re able to cut down on your spending and only spend on what you really need, your retirement savings will go a lot farther.<\/p>\n

Focusing on these four factors will help anyone assess the health of their retirement savings and their ability to provide for themselves in retirement. Don\u2019t just trust your retirement plan sponsor to tell you what to expect, do your own homework to ensure that you don\u2019t enter retirement underprepared.<\/p>\n","protected":false},"excerpt":{"rendered":"

It can be tempting to look at your 401(k), IRA, TSP, or other retirement account and think that you\u2019ve got it made. Maybe you have $100,000 in your account, or $250,000, or maybe you\u2019re one of those lucky ones with over $1 million. But rather than thinking of the lump sum in your account, have […]<\/p>\n","protected":false},"author":3,"featured_media":32130,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[213],"tags":[],"class_list":["post-28430","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-retirement"],"acf":[],"yoast_head":"\nHow Much Will Your Retirement Account Pay You Monthly? – Goldco<\/title>\n<meta name=\"description\" content=\"If you are interested to know how much income you can expect per month in retirement, there are 4 important factors you need to take into account.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/goldco.com\/much-will-retirement-account-pay-monthly\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How Much Will Your Retirement Account Pay You Monthly? 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