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How Long Will $800,000 Last in Retirement?
Mar 30

Bob Haegele

Saving for retirement is one of the most important parts of securing your financial future. While programs like Social Security can help, they often aren't enough on their own. This is why it is crucial to have retirement savings of your own. You may be wondering exactly how much money is enough; for instance, could you survive on $800,000? Let's take a look.

For more help planning your retirement, consider working with a financial advisor.

Determining Retirement Expenses
The first step to knowing how long your money will last is to figure out your
living expenses:

Fixed Expenses
Fixed expenses are those that don't change from one month to the next. For
example, this might include rent or a mortgage, insurance premiums and utilities.
Add these expenses together and see how much you spend monthly and annually.

Variable Expenses
Variable expenses are expenses that are not the same every month. Many things
could fall into this category, including travel expenses, health care costs,
entertainment and charitable donations. Because these expenses are variable, you
will likely have to set a limit on how much you can spend on them each month. If
you reach that limit, you must either use money from elsewhere in your budget or
forego the purchase.

Calculating Retirement Income
The next challenge is calculating retirement income. This can be more
challenging than calculating your income while working because you might have
more sources of income. For example, your retirement income might include:

Social Security
Pension plans
Retirement savings
The good news is that Social Security and pension benefits don't change from one
month to the next. They might include cost of living increases each year, but
their relative stability makes planning around them easier. What can be tougher
to plan around is retirement savings, especially if you are relying on
investments. You can use SmartAsset's free retirement calculator to see if you
are on track to meet your retirement goals.

Estimating the Length of Retirement
Another challenge of planning for retirement is estimating how long your
retirement will be. 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 retirement planning. People live longer than they used to, so
it's important to be prepared if you will live several decades after you retire.
The life expectancy is currently about 77 years in the United States.

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

Retirement Portfolio Styles
The next step is to determine your investment strategy. For example, your
portfolio might be more on the conservative side, or it could be more on the
aggressive side. Here is a quick look at how an $800,000 retirement portfolio
might look, depending on your strategy:

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

50% bonds ($400,000)
30% cash ($240,000)
20% stocks ($160,000)
The goal of a conservative portfolio is generally one of wealth preservation
rather than wealth building.

By The Associated Press, Copyright 2023

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