How to Boost Retirement Savings with the $1,000-a-Month Rule - Slavic401k (2024)

FAQs

How to Boost Retirement Savings with the $1,000-a-Month Rule - Slavic401k? ›

As a general rule of thumb, you will withdraw approximately 5% of your retirement income every year for expenses. The Balance breaks down the numbers below: Start with $240,000 and multiply it by 5%, which equals $12,000. Next, divide $12,000 by 12 months, which totals $1,000 per month.

Wes Moss, certified financial planner (CFP), coined the $1K per month retirement rule. Moss's system states that you can draw $1,000 monthly from your retirement plan for every $240,000 you have saved. This is based on the concept that you can earn 5% each year on your retirement savings.

If you start by contributing $1,000 a month to a retirement account at age 30 or younger, your savings could be worth more than $1 million by the time you retire. Here's how much you should expect to have in your account by the time you retire at 67: If you start at 20 years old you should have $2,024,222 saved.

Everyone isn't going to want to spend $10,000 net a month in retirement. For some people, that will be way more than they need each month. For others, it might not be enough. And there might be some people that spending $10,000 net a month in retirement is just right.

So, if you're aiming for $100,000 a year in retirement and also receiving Social Security checks, you'd need to have this amount in your portfolio: age 62: $2.1 million. age 67: $1.9 million. age 70: $1.8 million.

One example is the $1,000/month rule. Created by Wes Moss, a Certified Financial Planner, this strategy helps individuals visualize how much savings they should have in retirement. According to Moss, you should plan to have $240,000 saved for every $1,000 of disposable income in retirement.

Average Retirement Spending

According to the Bureau of Labor Statistics (BLS), the average income of someone 65 and older in 2021 was $55,335, and the average expenses were $52,141, or $4,345 per month.

According to the SSA's Office of the Actuary, retired-worker beneficiaries who were 62 years old in December 2023 received an average check of $1,298.26. As for 67-year-old retired-worker beneficiaries, the average payout was a more robust $1,883.50.

This money will need to last around 40 years to comfortably ensure that you won't outlive your savings. This means you can probably boost your total withdrawals (principal and yield) to around $20,000 per year. This will give you a pre-tax income of almost $36,000 per year.

According to EBRI estimates based on the latest Federal Reserve Survey of Consumer Finances, 3.2% of retirees have over $1 million in their retirement accounts, while just 0.1% have $5 million or more.

What is the magic number for retirement savings? ›

Here's how much you would need to put into a retirement account each month, starting at different ages, to reach the $1.46 million “magic number” by age 65, according to Northwestern Mutual's “Planning & Progress Study 2024.” Figures are based on a 7 percent average return compounded daily.

With the $1,000 per month rule, if you plan to withdraw 5% of your savings each year, you'll need at least $240,000 in savings. If you aim to take out $2,000 every month at a withdrawal rate of 5%, you'll need to set aside $480,000. For $3,000, you would aim to save $720,000.

While $1,500 might not be enough for non-housing retirement expenses for many people, it doesn't mean it's impossible to stick to this or other amounts, such as if you're already retired and don't have the ability to increase your budget.

$300,000 can last for roughly 26 years if your average monthly spend is around $1,600. Social Security benefits help bolster your retirement income and make retiring on $300k even more accessible. It's often recommended to have 10-12 times your current income in savings by the time you retire.

The main drivers include how much you spend and how much retirement income you get. If you have a generous income from pensions or Social Security, $300k might be plenty. But without significant resources, your spending needs to be relatively low. The amount you'll spend depends on several factors.