Here’s what you need to invest to have $75,000 a year in retirement

If you’re thinking about retiring, make sure you have a comfortable pillow.

Let’s say you want to earn at least $75,000 a year in retirement. Following the 4% rule, you need a nest egg of about $1.875 million. This rule suggests that if you withdraw 4% of your pension each year, it should last you about 30 years. For example, if you want or need $50,000 a year, your nest egg should be around $1.25 million. For $75,000, your nest egg should be about $1.87 million.

And if you need or want to pull in about $100,000 a year, your nest egg should be around $2.5 million.

However, this does not involve fees or charges, which are paid from the money withdrawn.

Still, your goals are achievable, especially if you start early, get aggressive with what you have right now, and even take advantage of any employer matches.

Key points about this article

• If you’re thinking about retiring, make sure you have a comfortable pillow.
• Using the 4% rule, if you want access to $75,000 a year, you need a nest egg of about $1.875 million. If you need or want to pull in about $100,000 a year, your nest egg should be around $2.5 million.
• Also: Take this quiz to see if you’re about to retire ^(Sponsored)

Begin with the End in Mind

As you approach retirement, “begin with the end in mind,” as noted by Stephen Covey, author The 7 Habits of Highly Effective People.

This includes taking into account how much you have to spend each year on rent or mortgage, unless you are one of the lucky ones who paid off your mortgage, health care and long-term costs, food, medicine, transportation and maybe even pet expenses. Also, do you expect to travel a lot and how much do you expect to spend? Maybe you have plans to help your children and even their children with things like college tuition.

This is not an exhaustive list, but a general idea that you may want to keep in mind.

You also want to consider how much you can receive from Social Security, which could reduce what you plan to take out of retirement each year if you choose to follow the 4% rule.

Contribute to an Individual Retirement Account (IRA)

An Individual Retirement Account (IRA) allows you to save for retirement with tax-free growth or on a tax-deferred basis.

You can invest in a traditional IRA, for example. Although it’s best to check with your financial advisor, you can often deduct contributions on your tax return.

There’s also the Roth IRA, where you contribute money you’ve already paid taxes on. With a Roth IRA, your money can grow tax-free with tax-free withdrawals. But again, consult your financial advisor before doing anything.

Or, if you’re self-employed, look into the Solo 401(k), a variant of the 401(k) plan, but designed specifically for self-employed people.

Also, for 2024, the IRS says you can contribute up to $69,000 with an additional $7,500 catch-up contribution if you’re 50 or older.

And if you have an employer that will match your 401(k), max out your contributions up to the amount your employer will match. If your employer will match up to 6% of your salary, max it out. To really build your wealth using that employer match, start early with your employer, even if you can only afford to put 1% of each paycheck into retirement. If you make $75,000 a year and contribute 1%, that’s $750 for retirement. If your employer matches this, you have $1,500 for retirement per year. If you contribute 6% and your employer matches that, that’s about $6,750 in retirement per year.

Social security delay

Choosing the right time to retire and receive retirement benefits is critical.

While this may depend on variables such as shortfalls in retirement savings, health, current income and other financial needs, a delay in receiving Social Security can be beneficial.

First, according to the Social Security Administration, “If you have reached full retirement age but are not yet 70, you can ask us to suspend your pension payments. By doing so, you will earn delayed retirement credits for each month your benefits are suspended, resulting in a higher benefit payment for you.”

Second, according to Kiplinger.com, “For every year you delay taking your Social Security benefits past full retirement age, you get an 8 percent increase in your benefit until age 70. For example, if you were receiving $1,000 a month at full retirement age of 66, deferring benefits until age 70 would increase your monthly check to $1,320.”

It’s just something to keep in mind if you want to pay what you get into retirement.

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