According to a new report in Reuters, the average American who is on the brink of retirement (ages 60 - 64) has $360,000 in their retirement portfolio, including defined contribution plans (such as 401k accounts) and individual retirement accounts.
Does that sound like a lot?
If you think "yes," then consider this:
Financial experts recommend that you withdraw no more than 4 percent from your retirement portfolio per year, in order to give yourself the best chance of making your money last.
That means someone with a $360,000 balance can only withdraw $14,400 per year.
Other financial experts are starting to make a case that the "safe retirement withdrawal rate" should only be 3 percent. If that's the case, a person with a $360,000 portfolio can only withdraw $10,800 annually.
Where will the rest of their retirement income come from? Let's hope they have a pension, a large Social Security payout, or a solid source of part-time or hobby income. Let's also hope they're debt-free, including their mortgage, and have low health care costs.
Read these articles to learn more about preparing for retirement:
Are you crunched for both time and money?
Don't worry. Here are seven things you can do to improve your personal finances within 10 minutes or less. The next time you have a 10-minute block of time, act on one of these tips!
Do you think it's possible for an average, middle-class family living in Detroit to save an extra $12,000 per year without making any massive, drastic changes to their lifestyle?
Brian O'Connor says yes. In fact, he proved it.
O'Connor set out on a quest to chop $1,000 per month from his family budget by saving $100 per month from each of his family's top 10 expenses. He wrote about it in a book called The $1,000 Challenge.
Read more about that book -- and O'Connor's journey to a tighter budget -- at the link above.
Are you thinking about moving from a two-income household to a one-income household? Are you or your spouse considering quitting work so that you can stay-at-home full-time?
If so, then budgeting takes on an increased importance. Here's some advice that can help.
- Tips for Couples Transitioning from Two Incomes to One
- 5 Critical Action Items for One-Income Households
- How You Can Build HUGE Savings By Practicing to Be a One-Income Household
Best of luck!
Are you already wealthy ... or do you aspire to be wealthy in the near future?
If so, then you might be wondering at what point you can stop budgeting. At what point do you have so much money that you don't need to budget anymore?
The answer: Never. Here's a list of reasons why the rich should budget, too.
Budgeting is the practice of setting priorities, and aligning your spending with those priorities.
So what should be your top financial priority, with regard to your long-term savings? In one word: Retirement.
Your other long-term savings goals -- including paying off debt and sending your kids to college -- come second to this budgeting priority.
Learn why retirement should be your #1 priority in this post.
Creating a budget is actually an act of "setting priorities." You have limited money and you're deciding where to deploy your limited resources.
So I wanted to take a moment to highlight three expenses that should be at the TOP of your priority list. Don't cut back on these three items -- even if you're trying to pay off debt.
What's a credit score? You know that this scary-sounding number can determine your future: whether or not you qualify for a mortgage, a car loan, or a business loan. But how, exactly, is a credit score calculated?
And more importantly, what can you do to build and maintain a great credit score?
This latest article discusses how a credit score is calculated, and gives pointers on how you can enhance your own score.
If you're ages 40 - 55, you might have a tough time learning about financial planning and money management.
There's a lot of information geared towards people in their 20's and 30's. It's relatively easy to find articles that discuss how to pay off your student loans, buy a house, or budget for starting a family -- all activities that, for the majority of Americans, happen during those two decades of life.
And if you're 55 or older, you're imminently planning retirement. There's a lot of information for your segment, as well.
But what if you're 40 to 55? You probably own a home, you're raising teenagers, you have some money saved for retirement, and you're generally trying to learn how to optimize. What advice should you be reading?
Here are a few of my favorite posts for the age 40 - 55 demographic:
- Check out these Retirement Savings Tips for People 40 and Older
- Want to create a $1 million portfolio in as little as 17 - 20 years? Read how to be a millionaire.
- How to Create Your First Budget. This is an all-ages classic.
- If you have college-bound children, check out How Much Should My Child Borrow for College?
Let's start with the end-goal, and work backwards. How much money do you want to live on, each year, during retirement?
Once you know that number, you can calculate how much you should have in your portfolio. And once you know your ideal portfolio, you'll know how much to save each month in order to get there.
Check out this latest post for more details on retirement planning and budgeting.