September 30, 2023

How long will $800,000 last in retirement?

how long will 800k last in retirement

how long will 800k last in retirement

Saving for retirement is one of the most important parts of securing your financial future. While programs like Social Security can help, they are often not enough on their own. It is therefore crucial that you have your own pension savings. You may be wondering just how much money is enough; for example, could you survive on $800,000? Let’s see.

Consider working with a financial advisor for more help planning your retirement.

Determine pension costs

The first step to knowing how long your money will last is to calculate your cost of living:

Fixed charges

Fixed expenses are expenses that do not change from one month to the next. Think of rent or mortgage, insurance premiums and utilities. Add these expenses together and see how much you spend monthly and annually.

Variable cost

Variable costs are costs that are not the same every month. Many things can fall into this category, including travel expenses, healthcare costs, entertainment, and charitable donations. Because these expenses are variable, you will probably have to put a limit on how much you can spend on them each month. If you hit that limit, you’ll have to use money from elsewhere in your budget or forego the purchase.

Calculate retirement income

how long will 800k last in retirement

how long will 800k last in retirement

The next challenge is calculating retirement income. This can be more challenging than calculating your income while you work, as you may have more sources of income. For example, your retirement income may include:

  • Social Security

  • Plan retirement

  • Pension savings

The good news is that Social Security and retirement benefits don’t change from one month to the next. They may include an increase in the cost of living each year, but their relative stability makes it easier to plan around them. What can be more difficult to plan for is retirement savings, especially if you rely on investments. You can use SmartAsset’s free retirement calculator to see if you’re on track to meet your retirement goals.

Estimating the length of retirement

Another challenge in planning your retirement is estimating how long your retirement will last. This is not an easy question to answer, as many variables can affect life expectancy. However, estimating your life expectancy is an important part of your retirement planning. People are living longer than they used to be, so it’s important to be prepared if you’ll be living for decades beyond retirement. Life expectancy is currently about 77 years in the United States.

In addition to life expectancy, you need to consider things like your current health and family history and how it will affect your life expectancy. Finally, you should use an inflation calculator to see how long your money will last.

Retirement Portfolio Styles

how long will 800k last in retirement

how long will 800k last in retirement

The next step is to determine your investment strategy. For example, your portfolio may be more on the conservative side, or it may be more on the aggressive side. Here’s a quick look at what an $800,000 retirement portfolio could look like, depending on your strategy:

Conservative portfolio

With a conservative portfolio, your investments will mainly consist of relatively low-risk investments. For example, you have:

  • 50% bonds ($400,000)

  • 30% cash ($240,000)

  • 20% Equity ($160,000)

The goal of a conservative portfolio is generally wealth preservation rather than wealth accumulation. So you can also target dividend-paying blue-chip stocks instead of growth stocks.

Balanced Portfolio

A balanced portfolio may suit retirees who want a combination of growth and income and are willing to accept some risk in exchange for higher returns. An example of your asset allocation could be:

  • 50% Equity ($400,000)

  • 30% Bonds ($240,000)

  • 20% cash ($160,000)

This portfolio contains a noticeably higher allocation to equities and cash being the lowest percentage. A balanced portfolio often contains a mix of stocks, bonds and cash. It tends to focus on diversified investments that offer a mix of growth and income.

aggressive portfolio

An aggressive portfolio may suit retirees with longer time horizons who are willing to accept higher risk in exchange for higher potential returns. If you have an aggressive $800,000 retirement portfolio, stocks become the focus of your portfolio:

  • 70% Equity ($560,000)

  • 20% bonds ($160,000

  • 10% cash ($80,000)

An aggressive portfolio can contain a mix of high-growth stocks and small-cap stocks. Some aggressive investors may venture into alternative investments such as commodities or precious metals.

It is important to note that these are just examples and the right investment strategy for your retirement portfolio will depend on your individual goals, risk tolerance and time horizon. It’s always a good idea to consult a financial advisor before making any major investment decisions, especially when it comes to retirement planning.

It boils down

How long to retire $800,000 depends on factors such as your expenses, retirement income, and how long your retirement will be. If you have significant income from sources such as a pension and Social Security, an $800,000 portfolio can last for many years. That’s especially true if your expenses are low and you don’t have significant healthcare cos
ts. But again, there are a lot of variables. It is best to meet with a financial advisor who will help you create a custom retirement plan.

Tips for retirement savings

  • A financial advisor can guide you through important financial decisions, such as determining your investment strategy. SmartAsset’s free tool pairs you with up to three financial advisors serving your area, and you can interview your advisor matches for free to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

  • Deciding how to invest can be challenging, especially if you don’t know how much your money will grow over time. SmartAsset’s investment calculator can help you estimate how much your money will grow to help you decide what type of investment is right for you.

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