It's important to fund an IRA or 401(k) throughout your career so you can retire with a nice chunk of money. But according to Northwestern Mutual, the average retirement savings plan balance across workers of all ages is $89,300. And among people in their 60s who are likely on the cusp of retirement, the average balance is $112,500.
As such, if you're heading into retirement with a nest egg worth $100,000, your savings may be roughly in line with what the average near-retiree has socked away. But that doesn't mean that a $100,000 balance will get you very far.
Why $100,000 isn't so great
A $100,000 savings balance could do a lot for you in the context of your emergency fund. But in the context of a retirement nest egg, it's unfortunately just not a lot of money.
For many years, financial experts thought that tapping retirement savings to the tune of 4% a year was a good bet. Due to increased life expectancies and other factors, many experts are now saying that a lower withdrawal rate, like 3%, may be more appropriate.
But even if we stick with 4%, for a $100,000 nest egg, that results in $4,000 of annual income a year. Meanwhile, the average Social Security benefit as of earlier this year was $1,827 a month. So if that's the benefit you're in line for and you're only able to get $4,000 a year out of your nest egg, you're looking at an annual income of about $26,000. It's hard to live comfortably on that even if your home is paid off and you're used to being frugal.
Set yourself up for a much larger nest egg
A big reason some people wind up with limited retirement nest eggs is that they don't start saving and investing early on in their careers, but rather, wait until their 40s or 50s to begin growing long-term wealth. But if you're able to start young, you may find that you're able to easily retire with far more than $100,000, even if your monthly contributions to your IRA or 401(k) plan are quite modest.
Let's say you start funding your retirement savings at age 27 and retire at age 65. Let's also assume you're only able to set aside $200 a month during that time.
The stock market has, over the past 50 years, delivered an average annual 10% return, as measured by the S&P 500's performance. So if you're able to snag that same return, you'll end up with almost $874,000. That gives you an annual income of about $35,000 from your savings alone if you follow the 4% withdrawal rule. Add in another $22,000 or so from Social Security, and you could be in pretty decent shape.
Coming into retirement with $100,000 in savings is far better than not having any savings at all. But the reality is that $100,000 just isn't a ton of money for what could easily be 20 years of retirement or more. So if you want to avoid feeling cash-strapped later in life, start funding your IRA or 401(k) as early as you can.
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FAQs
“With a nest egg of $100,000, that would only cover two years of expenses without considering any additional income sources like Social Security,” Ross explained. “So, while it's not impossible, it would likely require a very frugal lifestyle and additional income streams to be comfortable.”
Can you retire with only 100k? ›
$100,000 is not the ideal figure to aim for as a retirement savings amount, especially if you have the time and ability to save more. But it's also not impossible to make that much money work, provided you're willing to be flexible.
What is a normal amount to retire with? ›
By age 35, aim to save one to one-and-a-half times your current salary for retirement. By age 50, that goal is three-and-a-half to six times your salary. By age 60, your retirement savings goal may be six to 11-times your salary. Ranges increase with age to account for a wide variety of incomes and situations.
How many Americans have $100,000 in savings? ›
Most American households have at least $1,000 in checking or savings accounts. But only about 12% have more than $100,000 in checking and savings.
Do most people need of their income after you retire? ›
The 70-80% Spending Rule
While the 70-80% Rule is a good starting point, the actual percentage can vary considerably depending on individual circ*mstances. A study of actual retirement cost found that while spending in retirement ranges from 54-87%,that most retirees use 70% or less of their former income.
How long can $100,000 last in retirement? ›
Bottom Line. With $100,000 you should budget for a retirement income of around $5,000 to $8,000 on top of Social Security, depending on how you have invested your money. Much more than this will likely cause you to run out of money within 25 – 30 years, which is potentially within the lifespan of the average retiree.
Can you live on $3,000 a month in retirement? ›
Top the amount with 401(k) savings, living on $3,000 a month after taxes is possible for a retiree. For those who only have social security benefits to rely on, there are many places where they can retire on their checks both in the USA and around the world.
What is the average Social Security check? ›
According to Shedden, the current average Social Security benefits is around $1,900 monthly.
What is considered a good monthly retirement income? ›
As a result, an oft-stated rule of thumb suggests workers can base their retirement on a percentage of their current income. “Seventy to 80% of pre-retirement income is good to shoot for,” said Ben Bakkum, senior investment strategist with New York City financial firm Betterment, in an email.
What is the average 401k balance for a 65 year old? ›
You may have to rely on Social Security
Many retirees with little to no savings rely solely on Social Security as their main source of income. You can claim Social Security benefits as early as age 62, but your benefit amount will depend on when you start filing for the benefit.
What if I have no enough money to retire? ›
If you retire with no money, you'll have to consider ways to create income to pay your living expenses. That might include applying for Social Security retirement benefits, getting a reverse mortgage if you own a home, or starting a side hustle or part-time job to generate a steady paycheck.
Can you retire with no savings? ›
“Nothing is impossible," says Terri Fiedler, president of retirement services at Corebridge Financial, a financial services company in Houston. "However, with very little saved, it will likely be much harder to live the life you envisioned in your retirement years.”
What is the most common source of income after retirement? ›
Sources of Retirement Income
- Social Security. For many, Social Security will be a vital—and significant—source of retirement income. ...
- Defined Benefit Plans. ...
- Defined Contribution Plans. ...
- Home Equity. ...
- Reverse Mortgages.
There are a couple of key financial benefits of working in retirement. First, there's a greater likelihood that you can put off collecting Social Security. Until age 70, for every year you delay past your full retirement age — 66 or 67, depending on the year you were born — your benefit will rise by 8%.
Who pays you when you retire? ›
The Social Security Retirement benefit is a monthly check that replaces part of your income when you reduce your hours or stop working altogether. It may not replace all your income so it's best to identify other ways to pay for your monthly expenses as you age.
Where can I retire with 100K? ›
25 Best Small Towns To Retire Where $100K in Savings Will Last You the Longest
- Lindale, Texas.
- Central, South Carolina. ...
- Whitehouse, Texas. ...
- Jersey Village, Texas. ...
- Rawlins, Wyoming. ...
- Fort Mitchell, Kentucky. Total population: 8,667. ...
- Kemah, Texas. Total population: 1,945. ...
- Tea, South Dakota. Total population: 5,922. ...
Some advisors recommend saving 12 times your annual salary. 12 A 66-year-old $100,000-per-year earner would need $1.2 million at retirement under this rule.
At what age should you have 100K? ›
“By the time you hit 33 years old, you should have $100,000 saved somewhere,” he said, urging viewers that they can accomplish this goal. “Save 20 percent of your paycheck and let the market grow at 5% to 7% per year,” O'Leary said in the video.
Is 100K in retirement by 30 good? ›
“By the time you're 40, you should have three times your annual salary saved. Based on the median income for Americans in this age bracket, $100K between 25-30 years old is pretty good; but you would need to increase your savings to reach your age 40 benchmark.”
