If you have $850,000 saved and are planning to retire at 63, you need to think carefully about whether you have enough money to cover all of your expenses.
When you run the numbers, you may decide that it makes sense to do some consulting work if it’s available to you — especially if you can bring in that income to delay claiming Social Security and increase your future monthly benefits.
If you opt to work part-time, you definitely won’t be alone in doing so. Research from T. Rowe Price found that 20% of retirees are working either full or part-time, and another 7% are looking for work. Almost half (48%) are working for financial reasons, while 45% are motivated by the social and emotional benefits of having a job.
So, should you join the ranks of the un-retired, or will your $850,000 be enough?
There’s no question that $850,000 is a good amount of money and more than many people have. In fact, Vanguard’s 2024 How America Saves report says the median balance in defined contribution plans of those aged 55 to 64 is $87,571.
Unfortunately, although you have a pretty substantial amount saved, it’s not going to produce as much income as you might think. That’s because you need to limit the amount you take out of your account each year to a safe withdrawal rate.
A popular guideline says withdrawing 4% from your balanced portfolio in the first year of retirement and adjusting for inflation each year thereafter means there’s a high likelihood that your nest egg will last 30 years.
However, Morningstar analysts now recommend a 3.7% withdrawal rate to ensure your money lasts.
With $850,000 saved, that would leave you with an income of $31,450.
Even if you add Social Security benefits to this, that’s probably not enough for you to live comfortably on. Doing some consulting work could help supplement that income.
Your consulting paycheck would also allow you to draw less from savings, and depending on how much you work and how much you are paid, perhaps even keep growing your nest egg for a while instead of starting to deplete it.
