If you have $700,000 saved up for retirement, it’s natural to wonder how many years it will last. How long $700,000 will last in retirement depends on post-retirement spending plans, investment strategy and earnings and additional sources of income among several factors, some controllable and others not. For some retirees, a $700,000 nest egg could support a long and secure retirement, while for others that sum might only last a few years. Effective retirement planning requires gaining an understanding of how key elements affect the length of time a given sum will last in retirement. Consider talking to a financial advisor about your situation.
What Decides How Long $700,000 Will Last
A sum of $700,000 will last a varying amount of time during retirement, with the actual result determined by a sizable number of variables. Here are some of the most important factors, along with a brief description of how they affect the outcome:
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Lifestyle, location and spending habits. Some areas of the country are more expensive than others, so location is a key variable affecting how long your nest egg will last. Similarly, maintaining a large home or traveling extensively in retirement can drain an account faster than downsizing and focusing on activities close to home.
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Investment returns. A conservative strategy focused on risk reduction may not generate sufficient income to avoid having to make sizable withdrawals to pay living expenses. That can cause a portfolio to shrink more rapidly than an investment strategy that effectively balances risk and reward to generate more income, conserving principal and allowing assets to keep earning.
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Additional income. Social Security, pension benefits, part-time work and other sources of retirement income can keep a retiree from having to make large withdrawals. That will allow a nest egg to last longer.
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Health-related expenses. Private health insurance premiums and medical bills for unexpected or chronic conditions can add significantly to the need to take money from a retirement account and reduce the time it will be available to a retiree.
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Economic trends. Market declines, excessive inflation and other economic events can have a powerful effect on individual retirees’ ability to make ends meet and how long a retirement nest egg will last.
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Other expenses. It’s particularly helpful to pay off debt before retiring so mortgage, auto loan, student loan and credit card payments aren’t elevating a retiree’s monthly expenses beyond their ability to pay with investment and other income.
Other elements that can also play a role include age at retirement and life expectancy span. For each individual retiree, these factors are likely to be different and produce a different answer to the question of how long $700,000 will last in retirement.