For many people, spending most of your days working is not the most desirable way to enjoy the day. You may start dreaming about retirement shortly after you land your first full-time job. However, your desire to actually bring this dream to life can intensify as you get older and as you watch your nest egg grow. Regardless of whether you currently have one million dollars’ worth of assets or you are quickly approaching this financial milestone, you may be wondering if you are ready to retire. The reality is that a million dollars today is not what it once was. Before you take the critical step of announcing your retirement plans, it is important to consider just how far your nest egg can carry you in retirement.
Trimming Back Expenses
Your ability to conserve your financial resources as much as possible is critical if you want your million dollar nest egg to last as long as possible. In order to accomplish this goal, you need to reduce your living expenses as much as possible. For example, if you can pay off your mortgage and car loan before you retire, you may be able to shave potentially thousands of dollars off of your monthly expenses. Focus your attention on ways to reduce living expenses as much as possible. If you have online car title loans in Texas, look for a feasible title loan buyout plan. Another idea to reduce expenses is to downsize to a single car in retirement.
Understanding Your Retirement Budget
The number of years that your nest egg will last in your retirement years is directly affected by your retirement budget. While trimming down expenses and even scaling back your lifestyle now is important, you must understand how your budget will be impacted by your retirement.
For example, if you currently have health insurance through your employer and are retiring early, you may not yet qualify for Medicare. This means that you will need to factor in the expense for out-of-pocket health insurance. This is just one of several budgetary factors that can change in retirement.
Investing Your Million
If you are like most people who are planning to retire soon, you likely do not have your cash sitting in a savings account drawing minimal interest. Your investment strategy can play a major role in how long your million dollars will last.
For example, if you invest your money in dividend stocks with a five percent return, you will receive $4,166 per month in dividend income without eating into your nest egg. If you require more than this to live on, you will need to draw down your capital regularly. There are other investment opportunities to consider as well.
For example, you could invest half of your nest egg in rental properties and the other half in dividend stocks. The rental properties may increase in value over the years, so any income that you draw from the rental properties may not decrease this portion of your capital. In fact, you may be able to increase your net worth while still drawing income from the investment.
Examining the Importance of Your Age
Your age is another important factor to consider when determining how long your million dollars will last. If you retire after the age of 67, you may be able to draw Social Security income and government-based healthcare benefits.
These two factors can dramatically offset the amount of money you need to live on in retirement. In this way, you can stretch your million dollars farther. More than that, you would not need the money to last as long like Texas title loans. If you retire earlier, you may have to draw more money from your nest egg, and you would need it to last longer. Because of this, you may be more likely to run out of money if you retire before the age of 67.
Using a Retirement Calculator
The reality is that each person has different investment plans and different living expenses. It is not possible to accurately determine if a million dollars is enough to retire on without personally examining various factors specific to you.
You can use a retirement calculator to plug in your personal factors. This will help you to better determine exactly how much money you need to retire or how soon you can feasibly retire on the nest egg that you have available.
Running out of money in retirement can be disastrous. If you are not confident in your ability to stretch your nest egg through retirement, consider working for a few more years. By doing so, you can amass more money, and you would not need to stretch your money as far.