How long will $200k last in retirement: a complete guide
How much do you really need to retire? Is $200k enough, and how long will it last? Read this article to find out everything you should know.
Summary
Retiring with $200,000 in savings will roughly equate to $15,000 annual income across 20 years.
If you choose to retire early, you will need additional savings in order to have a comfortable retirement.
Your tax bracket and how much you pay should also be considered when planning how much money you’ll need for retirement.
If you want to get ready for retirement, a trusted financial advisor can help you manage your finances and ensure your retirement savings align with your goals.
Can I retire with $200k?
The answer to this question depends on a number of different personal factors, including the age you’d like to retire and how you’d like your retirement years to look in terms of expenditure and lifestyle.
Here’s an example scenario:
You’re 60 and plan to retire at 65 – by which point you can access Medicare. Assuming you’ll live to be 85 and won’t want to work after retiring, you can anticipate a need for 20 years of income.
When accounting for annual return before taxes of 6% and a federal marginal tax bracket of 22%, if you retire with $200,000 at 65, that will equate to roughly $15,000 a year, or approximately $1,250 a month.
How long will $200,000 last in retirement?
You can determine the length of time that $200k will last you in retirement by asking yourself the following questions:
How much do I plan to spend as a retiree?
When do I plan to live when I retire?
Will I have any additional income, such as Social Security benefits?
Will I continue to invest in my later years?
Use these questions as the basis from which to start calculating your potential monthly outgoings in that phase of your life. Don’t forget to factor in your past and present spending habits. You should also consider how those habits might change over time.
Assuming an average annual return of 6% before taxes and a 22% federal marginal tax rate, the table below offers a detailed breakdown of how long $200k can last across various annual spending scenarios:
| Annual spending | Years it will last | Total interest | Total withdrawal | Total taxes |
|---|---|---|---|---|
| Annual spending | Years it will last | Total interest | Total withdrawal | Total taxes |
| $15,000 | 20 | $145,889 | £300,000 | $32,097 |
| $20,000 | 13 | $89,860 | $260,000 | $19,770 |
| $30,000 | 8 | $51,525 | $240,000 | $11,336 |
| $40,000 | 5 | $35,599 | $200,000 | $7,832 |
| $50,000 | 4 | $27,705 | $200,000 | $6,095 |
How much tax will I pay if I retire with $200k?
The exact amount you’ll pay in retirement income taxes if you enter your next life phase with $200,000 is hard to pinpoint and will depend on the following factors:
Where you live – Regardless of where you are in the country, you’ll have to pay federal income tax, though this is likely to be low on an amount like $200k spread over a decade. You’ll also have to cover state-level income tax in most states, though a handful of states don’t levy this.
If you have any other income – If you are making money outside your $200,000 retirement savings amount, whether through investment income, gifted revenue or earned income, this will increase the tax you must pay.
How your retirement funds are held – Some pension funds and retirement savings accounts are tax-advantaged. For example, if you have a Roth IRA, you won’t owe any tax when withdrawing the money, provided you’re over 59.5 years old. You’ll already have been taxed on this income as it entered the account.
Can you retire at 50 with $200k?
This figure is relatively low and could be further lowered by the potential impact of inflation and increasing living costs over time.
As such, it shouldn’t be surprising that early retirement at 50 with $200,000 in savings won’t be a viable option for many people.
While this might not work for everyone, you could make it worth with you.
It’s important to remember, alongside factors like inflation, that outgoings tend to be much lower during retirement than at other times in your life. Especially if:
Any children you have are grown and financially independent.
You’re a homeowner, and your mortgage is fully paid off.
You don’t have a costly and lavish lifestyle.
You’re able to keep investing and saving as a retiree.
How much money do you need to retire with $200,000 a year income?
If you want to retire with an annual income of $200,000, you will need a much larger savings amount.
Let's say you want to retire at 60 with a life expectancy of 80; you'll need to cover 20 years. Considering an average annual return of 6% before taxes and the Federal Reserve’s 2% inflation target, to guarantee $200,000 yearly (roughly $16,666 monthly) over 20 years, you'll need just over $2,844,000 in your retirement accounts.
This figure grows higher the further you are from retirement.
How much do Americans usually retire with?
As you might expect, the average retirement saving in the US changes with your age group. The older you are, theoretically, the longer you have to save.
According to the Federal Reserve System’s 2019 Survey of Consumer Finances, which looked at the sub-group of Americans with retirement savings pots, the average balance is $254,720 for 45 to 54-year-olds, rising to $426,070 for 65 to 74-year-olds.
If these figures worry you, and you’re concerned about fitting in below the average based on your age, you should note that extremes at both ends of the spectrum affect the data.
The median retirement savings balance is $100,000 for 45 to 54-year-olds and $164,000 for 65 to 74-year-olds.
4 ways to build up your savings ahead of retirement
If you need to grow your pot of money earmarked for retirement, you might be wondering how to increase your savings effectively and efficiently:
Reduce spending – If you’re struggling to save as much as you ideally want to, sit down and take a holistic approach to your finances, especially your regular expenditures. Can anything be struck from the list or at least reduced?
Take advantage of a long-term savings account – If you’re willing to tie a portion of your savings up for the long term and haven’t already done so, look into opening an IRA or something similar to benefit from tax savings and favorable interest rates.
Invest wisely – Becoming an investor and navigating complexities like the stock market can feel daunting. But, if you can accept some risk and seek some financial advice, a balanced investment portfolio could be just what you need to grow your $200k.
Get expert guidance – If you feel you’re doing everything you can, why not share your financial situation with an experienced, qualified advisor? They’ll almost certainly be able to shine a new light and make savings-boosting suggestions you can implement.
Get expert retirement advice
Retiring with $200k is possible but not ideal.
If you’re closer to retirement age and hoping to leave the working world sooner rather than later, budget carefully and set realistic expectations; only then can you decide what’s within your power and right for your situation.
For financial planning support and advice on your monetary situation as a retiree, connect with an experienced financial advisor through Unbiased. Get started here.
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Senior Content Writer
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.