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One of the biggest questions you’ll have when preparing for retirement is how much you’ll need to live on.

You’ll have to survey your needs to maintain the lifestyle you want during retirement, but will you have enough saved to get started?

I currently have $150,000 saved in my retirement fund. It’s an astounding amount when I look at the balance, and of course, I can’t help but think about how I would spend that money if I had it now. But now I have a steady income; when it comes time to retire, I most likely won’t. Therefore, I thought it would be a good exercise to break that $150,000 down and see how far I could theoretically stretch it.

How long will my money last in retirement if I stopped working right now? I was surprised at the results – you may be too.

Step 1: Figuring Out How Much You Live On

Before I could figure out how long my money would last in retirement, I needed a figure that would capture my average monthly costs today. Luckily, I have a budget prepared for my current expenses that already lists my income, monthly necessary expenses, and any additional costs I want to prepare for. I gathered those monthly numbers, which looked something like this:

Income: $4,000

Utilities: $250

Rent: $1,000

Savings: $1,000

Transportation: $120

Healthcare: $300

Food: $800

Other: $530

Currently, my income covers my expenses and allows me to keep saving for the future. I also don’t carry any debt from month-to-month, so I don’t have to worry about staggering balances accumulating interest.

However, would I be earning the same amount when I retired? Probably not. I had to factor out a new number that represented what my estimate costs in retirement would be.

Step 2: Estimating Your Retirement Costs

How much you’ll need to live on will depend on how you see your retirement life. How long will my money last in retirement if I chose to live in a high-income area? Probably not very long. But if I’m looking for a simple life somewhere quiet, my money will go a lot further.

The key to planning your retirement expenses is to not underestimate. If like me, you have years before your retirement, there’s a chance that inflation will knock down that overall savings balance I currently hold when it’s time to use it. Plus, as we age, there are unforeseen medical bills and costs that tend to also increase. Considering these factors, to calculate my expense budget at the time of retirement I would likely need to increase my healthcare costs and add a new line for taxes I’d now be responsible for on any retirement accounts.

Step 3: Calculating Your Potential Retirement Income

Creating a budget when you have steady employment is easy; I like to apportion all of my paycheck out into needed areas. But when that money stops coming in or drops down, you all of a sudden need to strategize how to change your budget in a way that works. This is exactly what most people experience in retirement.

When it comes to income in retirement years, most people will have a combination of social security payments and distributions from retirement accounts. But how you use these income streams can influence your lifestyle.

Social Security Income

The amount you earn from social security will depend on how much you paid into the system over the years, and how old you are at the time you choose to take your benefits. My full retirement age is 67, as I was born after 1960, and the Social Security Administration’s Retirement Estimator says I can expect almost $2,000 in monthly benefits if I choose to take them at that age. Unfortunately, that $2,000 is only half of what I earn now, which means cutting my budget in half or taking further steps.

Retirement Account Withdrawals

If you have a retirement account, you can withdraw from it once you hit retirement age. However, every time you withdraw money you need to pay income tax on it, which adds another cost to your budget. And while you (hopefully) don’t need to worry about social security running out, your retirement account only has what you add to it. If all of your money is going out during retirement, your retirement account can be depleted in your lifetime. How long will money last in your account if you keep taking some out each month?

Step 4: Figuring Out How Long My Money Will Last In Retirement

Now that I knew what my current income and expenses added up to, and had some ideas of how I would have money coming in during my retirement years, I formulated a few scenarios to help me see how much the $150,000 in my retirement account actually meant for my future. In both cases, I assumed I would not keep working in my retirement years, although there are plenty of options to do so if I wished.

Scenario 1: A Simple Life

For my “simple life” scenario I envisioned my retirement in a quiet place with lots of land, the opposite of my life in the city. Looking at my current budget, I could cut down on my expenses by downsizing at an older age. If I could chop my rent down, that would also lower my utility bills quite a bit, so my new estimated numbers were:

Utilities: $100

Rent: $700

However, I may need a car if I move to a rural area, so I decided to leave that amount as it was:

Transportation: $120

No matter where I live, it’s likely that my healthcare expenses will go up, so I added some extra costs to that current number:

Healthcare: $500

Ideally, I may even be able to grow some of my own food or at least buy it directly from farms, so I cut that number by quite a bit:

Food: $400

My new total expenses were now $1,820. That left two numbers unapportioned, discretionary or “other” spending, and my savings contributions. Before I plugged in those numbers, I looked at my anticipated social security income of $2,000 and realized I would only have $180 left over for entertainment, emergencies, and savings. I decided that I would take out $500 from my retirement account each month, costing me only a nominal amount in taxes. That left me with $680 for savings and other spending, which I split in half on my budget. I still wanted to travel and be able to see friends around the country, so those savings would help me do so while still protecting myself from emergencies and being able to pay off any debt I may have accumulated.

If I were to follow this path, I could expect my $150,000 retirement savings account to last for about 25 years. Of course, I was only taking small amounts every month, so there’s a likelihood that things would come up and I may need to withdraw more. It would be a simple life, but doable.

Scenario 2: The High Flier

But what if I wanted the opposite in my later years? After a life of frugal living, maybe I want to spend my retirement having and doing all the things I couldn’t do earlier. If I stayed put in the city and wanted to be out and about as much as possible, my budget would look something like…

Utilities: $250

Rent: $1,500

Transportation: $120

Healthcare: $500

Food: $1,000

Now my monthly costs look more like they do currently, coming in at $3,370 – but not counting for savings, emergencies, or other costs. All of a sudden, my anticipated social security income of $2,000 wouldn’t even cover my monthly bills, so I decided I would take $1,500 out of my retirement account each month. That left over a paltry $130 for my savings and other activities, but in this scenario, I wanted to live in the moment, not for the future.

If I went this way, how long will money last in my account? An estimated eight years, meaning I’d need to have a serious plan for bringing in additional income if that was the path I chose.

The Lesson: Plan, Plan, Plan

This exercise in looking at two very different scenarios of retirement helped me figure out how long my money will last. I was surprised that in both cases, I could feasibly run out of my hard-saved retirement money during my lifetime, which has helped me be more aware of the importance of planning now. Resources like blooom, a site that helps you analyze your 401k during your planning years so you maximize the amount you have saved, can be a big help in starting to save smarter. What you want out of your later years may change, but you can’t get back time lost when it comes to saving.

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