How Much to Retire? Will You Run Out of Retirement Money?

The #1 questions among those thinking about retirement is about the sum needed, i.e. how much to retire? Equally important, but often overlooked, is how long you will need the money. Let's look at both issues so you clearly see where you stand.

At age 65, the average life expectancy is 81.8 years for a man and 84.8 years for a woman. At age 75, the average life expectancy is 85.5 years for a man and 87.6 years for a woman.¹ With recent advances in medical science, it's no longer a stretch to think that you could live to be 100. In fact, the U.S. Census Bureau projects that by 2050, there will be nearly one million centenarians^2.This all means that the longer you live, the bigger the number required to answer 'how much to retire.' keep in mind that the figures about are averages meaning that of the women age 65 now, 50% will dies by age 84.8 and 50% will live longer!

No one wants to die sooner, so that's great news about longer life expectancy. The problem of course: If your retirement plan doesn't recognize the possibility of a long retirement, then you could potentially outlive your retirement money. Let's turn to the issue of amount: how much to retire.

Consider the following hypothetical example. Assume you're 64 years old and earn $60,000 per year. You plan to retire next year at age 65. You've accumulated $1,000,000 in retirement savings, which you think will return a hypothetical 6 percent per year throughout your retirement. And, you have a $60,000 annual retirement need (excluding Social Security). If you have a 15-year retirement from ages 65 to 80, you'll have no shortfall in retirement funds; in fact, you'll end up with almost $696,000 to pass on to your heirs. On the other hand, if you have a 30-year retirement, from ages 65 to 95, you'll run out of money at age 88.³ The table below illustrates. Of course, this example above is hypothetical and for illustrative purposes only. It is not meant to represent the performance of any particular product.

How Much to Retire? Will you run out of retirement money?

Hypothetical retirement savings

Age	Savings	Retirement savings needed
64	$1,000,000.00	$0.00
64	$1,059,999.94	$0.00
66	$1,058,028.28	$61,860.00
67	$1,053,905.60	$63,777.66
68	$1,047,439.82	$65,754.77
69	$1,038,425.39	$67,793.17
70	$1,026,642.42	$69,894.76
71	$1,011,855.72	$72,061.50
72	$993,813.88	$74,295.41
73	$972,248.18	$76,598.57
74	$946,871.51	$78,973.12
75	$917,377.18	$81,421.29
76	$883,437.69	$83,945.35
77	$844,703.39	$86,547.66
78	$800,801.08	$89,230.64
79	$751,332.50	$91,996.79
80	$695,872.80	$94,848.69
81	$633,968.79	$97,789.00
82	$565,137.20	$100,820.46
83	$488,862.75	$103,945.90
84	$404,596.18	$107,168.22
85	$311,752.06	$110,490.44
86	$209,706.59	$113,915.65
87	$97,795.12	$117,447.03
88	$0.00	$0.00
89	$0.00	$0.00
90	$0.00	$0.00
91	$0.00	$0.00
92	$0.00	$0.00
93	$0.00	$0.00
94	$0.00	$0.00
95	$0.00	$0.00

Source: Burling Bank. Assumes $1,000,000 in retirement savings has already been accumulated; another $60,000 is added. The money grows at a hypothetical 6 percent pear year; $60,000 (in today's dollars) in withdrawn each year. This example above is hypothetical and for illustrative purposes only. It is not meant to represent performance of any particular product.

Your own need may be more or less than the above illustration. But in addressing how much to retire, you can use the illustration as a staring point. If you need $30,000 annually, and not $60,000 as in our example, you will need at least half as much or $500,000 in retirement savings.

1 Source: National Center for Health Statistics, as of March 2006 (http://www.cdc.gov/nchs/data/hus/hus05.pdf#027).

2 Source: The US Census Bureau's 'National Population Projection,' as of July 2004 ().

3 Source: Burling Bank retirement calculator, .