1 min readLast updated April16,2024by Rachel Carey
Here’s everything you need to consider, from retirement income taxes to wealth-increasing tips, if you plan to retire with $800k.
Can you retire on $800k?
Yes, $800k provides a healthy nest egg that allows for annual withdrawals of around $32,000 from the age of 60 to 85, spanning 25 years. If $32,000 per year, or $2,667 per month, is sufficient to cover your retirement lifestyle, then $800k gives you an adequate buffer.
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| Initial Savings | Annual Spending | Enough? | Ending Balance after 25 years | Required Initial Savings |
|---|---|---|---|---|
| $40,000 | Yes | $707,594 | $722,462 | |
| $50,000 | Yes | $461,982 | $981,846 | |
| $800,000 | $60,000 | Yes | $206,666 | $1,161,538 |
| $70,000 | Barely | $8,350 | $1,341,231 | |
| $80,000 | No | -$190,807 | $1,520,923 |
So with an initial $800k nest egg, you could potentially withdraw between $50k-70k per year over 25 years before depleting your retirement savings completely.
How long will $800k last in retirement?
An $800k nest egg can provide income for over 25 years in retirement if you limit annual withdrawals to around $32,000 (4% rule).
The duration will vary based on your age at retirement and actual spending levels each year. Assuming a 6% average annual return before taxes and 22% tax rate, see projections below:
| Spending Per Year | Years It Will Last | Total Interest | Total Withdrawal | Total Taxes |
|---|---|---|---|---|
| $40,000 | 28 | $1,680,000 | $1,120,000 | $246,400 |
| $50,000 | 23 | $1,380,000 | $1,150,000 | $253,000 |
| $60,000 | 19 | $1,140,000 | $1,140,000 | $250,800 |
| $70,000 | 16 | $960,000 | $1,120,000 | $246,400 |
| $80,000 | 14 | $840,000 | $1,120,000 | $246,400 |
With $800k initially saved, you could withdraw $40k-60k annually and still have your portfolio last between 19-28 years. The higher your spending amount, the faster your savings get depleted. Assessing your specific retirement costs and life expectancy is key to determining withdrawal rate.
Consulting with an experienced financial advisor can provide tailored advice to assess your retirement needs based on your situation. Match with a financial advisor below.
Can I retire on $800k plus Social Security?
As we have established, retiring on $800k is entirely feasible. With the addition of Social Security benefits, the possibility of retiring with $800k becomes even more possible.
Adding in the current average annual Social Security benefit of $21,600 ($1,800 per month) increases your stable retirement income streams. This gives you more options when determining a withdrawal rate from your $800k savings balance to make it last.
For example, withdrawing $60,000 per year from your savings plus collecting $21,600 from Social Security provides $81,600 in annual retirement income. This combination allows your $800,000 savings to last for approximately 19 years without being fully depleted, based on earlier projections.
Remember Social Security benefits can be taxed, so it's important to optimize their combination with your personal savings in a tax-efficient manner. Meeting with a financial advisor can help determine the ideal personalized strategy for your $800k retirement account plus Social Security income situation.
What are the income taxes applicable to retirees with $800k?
Determining the tax implications of your retirement income is an important part of financial planning when you have $800,000 saved. While your yearly tax bill may not be excessive if you withdraw funds gradually over 20+ years, several key factors impact how much you will owe:
Your tax filing status (single, married filing jointly, etc)
Your state of residence
The source of retirement funds (pre-tax IRA, Roth IRA, etc)
Total annual retirement income amount
For example, if you retire at 65 and distribute the $800,000 evenly over 20 years, you would receive around $40,000 annually ($3,333 monthly). Assuming you file taxes as a single person, this income would place you in the 22% federal bracket plus applicable state taxes.
However, if the same $40,000 were from a Roth IRA that you contributed to post-tax during your working years, your withdrawals would be tax-free in retirement. Consulting a financial planner can help you optimize sources and taxation to maximum your long-term withdrawal rate.
Can you retire at 50 with $800k?
It is certainly possible to retire by age 50 with $800,000 in the bank, but you would need to adopt a relatively frugal lifestyle.
Using the 4% safe withdrawal rule, you could take out $32,000 per year, or $2,667 monthly. This should sustain you for 25 years until age 75. If you estimate living longer to 85 or 90, your annual withdrawals would need to be reduced accordingly.
While $32,000 annually is not an extravagant retirement income, strict budgeting and modest living expenses should allow you to leave your career early. Even if 50 proves unrealistic, you could likely achieve financial independence in your mid to late 50s.
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Three routes to increased savings
You may now want to figure out how to increase your savings, growing that $800,000 to $1 million or more to give yourself some additional breathing room. Some extra disposable income as a retiree. Our best recommendations are as follows:
Adjust your monthly budget and save where possible – try to avoid regularly spending your money on unnecessary things that matter less to you, in the grand scheme of things, than a happy and comfortable retirement. Set achievable lifestyle and financial goals with proper consideration of your future self. Cut back where you can, and redirect that money where it can be better used.
Build a varied portfolio of investments, seeking expert advice – a solid and stable investment portfolio comprising several types of securities could be very helpful to you, significantly boosting your savings and improving your retirement. If you don’t know where to begin, speak with an expert financial advisor to get started on your journey into investing.
Find the right retirement and pension products – many different savings accounts and products are available that can be helpful to you as a retiree. Annuities, for example, convert your savings into a guaranteed monthly income for a given period. This period could be the rest of your life if you purchase an annuity with a lifetime income rider.
The bottom line
If you’ve managed to save $800k for retirement, this is a viable savings for your post-work life.
This will guarantee you a valuable degree of security and comfort in your later years, and it’s a figure many will never reach
For retirement planning advice and investment guidance, connecting with an experienced financial advisor is highly recommended. They can guide you through the daunting world of retirement planning and lead you to success. Get started with Unbiased and find your perfect match.
Senior Content Writer
Rachel Carey
Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.
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