I'm 55 with $600K. Can I safely withdraw $90K per year in retirement?

Exploring Retirement Income Strategies


How would you like to generate $90,000 a year in guaranteed income in retirement? Well, I'm going to show you right now how quickly we can get that done. We had a 55-year-old couple come in to visit with us, evaluating different retirement income strategies for themselves. This 55-year-old couple had set aside about $600,000 that they earmarked in their 401k to generate retirement income, and they needed that $600,000 to generate $90,000 a year in income for the rest of their lives.

Initially, of course, we had a discussion around the 4% withdrawal rule, which was their primary strategy for generating that $90,000 a year for the rest of their lives when they turned 65. They're 55 years old today, and they wanted to generate $90,000 per year every year for the rest of their life in retirement, leveraging that 4% withdrawal rule.

1. Initial Discussion: The 4% Withdrawal Rule

In order to generate that, we needed to back into that number: what is the number that that $600,000 needs to grow to in order to create $90,000 per year at a 4% withdrawal rate? That would be equivalent to $2.2 million. This means that they would have to generate an annualized rate of return over the next 10 years at almost 14% per year. So, we need that portfolio to make 14% a year for the next 10 years in order to take 4% out and create $90,000 a year, and that would give them about a 95% chance of success in retirement of not running out of money.

2. Alternative Approach: Adjusting Withdrawal Rates

Alternatively, they said, "Well, what if we just increase that withdrawal rate 10 years from now? What kind of rate of return do we need to make over the next 10 years?" Well, if we want to generate that $90,000 per year in retirement income 10 years from now and we're going to take 7% from that portfolio, then we only need to turn that $600,000 into about $1.3 million over the next 10 years in order to do so. They're now going to need to generate an approximate return of 8% per year over the next 10 years, 8% a year for 10 years turning that $600,000 into $1.3 million, giving them a chance of success which is quite a bit lower. Now they would be looking at almost a flip of a coin, a 60% chance of success.

3. Third Strategy: Guaranteed Income Benefit Annuity

Then, we evaluated a third strategy: that third strategy using a guaranteed income benefit annuity. They would guarantee that 10 years from now, it would create about $90,000 per year in retirement income for the rest of both of their lives, no matter how long they lived, with 100% certainty.

4. Evaluation and Decision

After evaluating all three of these different options, they weren't confident that the market would return to them 14% a year every year for the next 10 years. They also weren't comfortable with a 60% chance of success 10 years from now, withdrawing 7% per year from their portfolio. So, now they decided to earmark that $600,000 for retirement income and set aside in a guaranteed income benefit annuity that guaranteed them that certainty that over the next 10 years, they can enjoy their work, knowing that they will, without a doubt, be able to make that retirement date.

If you want to create your very own guaranteed income strategy, then just click the link below in the description and schedule time to visit with one of our fiduciary financial advisers who have the responsibility to put your needs ahead of their own.