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To do so, attach the following notices to the program. It is safest to attach them to the start of each source file to most effectively convey the exclusion of warranty; and each file should have at least the "copyright" line and a pointer to where the full notice is found. one line to give the program's name and an idea of what it does. Copyright (C) yyyy name of author This program is free software; you can redistribute it and/or modify it under the terms of the GNU General Public License as published by the Free Software Foundation; either version 2 of the License, or (at your option) any later version. This program is distributed in the hope that it will be useful, but WITHOUT ANY WARRANTY; without even the implied warranty of MERCHANTABILITY or FITNESS FOR A PARTICULAR PURPOSE. See the GNU General Public License for more details. You should have received a copy of the GNU General Public License along with this program; if not, write to the Free Software Foundation, Inc., 51 Franklin Street, Fifth Floor, Boston, MA 02110-1301, USA. Also add information on how to contact you by electronic and paper mail. If the program is interactive, make it output a short notice like this when it starts in an interactive mode: Gnomovision version 69, Copyright (C) year name of author Gnomovision comes with ABSOLUTELY NO WARRANTY; for details type `show w'. This is free software, and you are welcome to redistribute it under certain conditions; type `show c' for details. The hypothetical commands \`show w' and \`show c' should show the appropriate parts of the General Public License. Of course, the commands you use may be called something other than \`show w' and \`show c'; they could even be mouse-clicks or menu items--whatever suits your program. You should also get your employer (if you work as a programmer) or your school, if any, to sign a "copyright disclaimer" for the program, if necessary. Here is a sample; alter the names: Yoyodyne, Inc., hereby disclaims all copyright interest in the program `Gnomovision' (which makes passes at compilers) written by James Hacker. signature of Ty Coon, 1 April 1989 Ty Coon, President of Vice This General Public License does not permit incorporating your program into proprietary programs. If your program is a subroutine library, you may consider it more useful to permit linking proprietary applications with the library. If this is what you want to do, use the [GNU Lesser General Public License](http://www.gnu.org/licenses/lgpl.html) instead of this License. I'm 49 With $500k in Savings But ‘I'm Concerned' About Retirement Income and Annuities Are ‘Too Expensive.' What Are My Options? - sinth.info

I’m 49 With $500k in Savings But ‘I’m Concerned’ About Retirement Income and Annuities Are ‘Too Expensive.’ What Are My Options?

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Financial advisor and columnist Matt Becker

Financial advisor and columnist Matt Becker

I’m 49 years old and I’ve had a steady job for over 15 years now as a government contractor. I plan to retire at around 65. I have $500,000 in savings between my 401(k), IRA and individual savings accounts. I’m renting, I don’t have any debt and I have a small family of three. I’m concerned about my sources of income in retirement. I do not have a pension but I live below my means of income. I read about annuities, but they are too expensive. What would be my other options for retirement income?

– Victor

First of all Victor, it’s great that you’re giving this so much thought so far in advance. It’s also impressive that you’ve already accumulated some significant savings.

In fact, it looks to me like you’re in great shape. While there are many details about your situation that I don’t know, my guess is that you don’t need to do anything overly complicated in order to make sure that you have enough income in retirement. (And if you need more help planning for retirement, consider speaking with a financial advisor.)

Projected Income From Your Retirement Savings

Your savings alone look like it should provide you with most of the income you’ll need in retirement.

According to the 4% rule, you can safely withdraw 4% of your retirement portfolio each year, adjusting upward for inflation, with little risk of ever running out of money. In fact, in most cases, you’ll actually end up with more money than you started with.

So the question then is how much money you’re on track to have by age 65, and how much annual income it will provide. I made a few assumptions about your situation to run the numbers:

  • $50,000 annual salary

  • 5% personal 401(k) contribution ($2,500 per year or $208.33 per month)

  • 3% employer match ($1,500 per year or $125 per month)

  • 6% annual investment return

  • 2.1% annual inflation1

Starting with a balance of $500,000, those numbers project that you’ll have $1,409,757 in retirement savings by the time you reach age 65. Using the 4% rule, that equates to an annual income of $56,390.

But that number doesn’t factor in inflation, which makes it hard to compare it to your salary today. If I instead use an inflation-adjusted return of 3.82%, you end up with a balance of $1,008,439. That equates to an annual income of $40,337 in today’s dollars.

That $40,337 is pretty close to your assumed $50,000 annual salary. It may even fully replace that salary given taxes and the fact that you live below your means. But it’s also not the only source of income you’ll have in retirement. (And if you need help projecting your income in retirement, consider matching with a financial advisor.)

Don’t Forget About Social Security

A Social Security card sandwiched between cash.

A Social Security card sandwiched between cash.

For all the doomsday predictions out there, Social Security is still alive and well and you can count on it providing a steady and predictable income.

Using this calculator provided by the Social Security Administration, and again assuming a $50,000 annual salary, you can expect to receive a monthly benefit (in today’s dollars) of about $1,844 when you reach age 67, which equates to an annual income of $22,128.

When added to the $40,337 from your retirement savings, that’s a total annual income of $62,465 – more than enough to replace your current salary. (And if you’re unsure when is the right time to claim Social Security, a financial advisor can help.)

What If Your Income Is Higher?

Of course, I’m making a big assumption by estimating your annual income at $50,000. And the truth is that the more you currently make, the harder it could be to replace in retirement.

For example, if I instead assume that your current salary is $100,000 and keep all the other variables the same, here are the results I get (all presented in today’s dollars):

  • $43,859 annual income from retirement savings

  • $35,040 annual Social Security benefit

  • $78,899 total annual retirement income

While that’s more money than the first example, it actually adds up to a smaller percentage of your pre-retirement income. However, it still may be enough to meet your spending needs after factoring in taxes and your actual expenses.

If you’re concerned though, the best thing you can do is simply increase the amount that you’re contributing to your retirement accounts. For example, if you’re making $100,000 and increase your employee contribution to 15%, your expected annual income from retirement accounts increases to $52,664.05. That’s an extra $8,805 per year, which could make a big difference. (And if you need more help with your retirement plan, this tool can help match you with an advisor who might meet your needs.)

Next Steps

Most of the things you could do specifically for income – such as purchasing an annuity, an investment property or high-dividend stocks – come with costs and other downsides that could do more harm than good. They could make sense for your situation, either now or in the future, but they are certainly not cure-alls.

The way I see it, you’re on the right track and there’s nothing special you need to do beyond possibly increasing your retirement contributions.

Tips for Finding a Financial Advisor

  • Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

110-year projected inflation rate, Federal Reserve Bank of Cleveland

Matt Becker, CFP®, is a SmartAsset financial planning columnist and answers reader questions on personal finance and tax topics. Got a question you’d like answered? Email AskAnAdvisor@smartasset.com and your question may be answered in a future column.

Please note that Matt is not a participant in the SmartAdvisor Match platform, and he has been compensated for this article.

Photo credit: ©iStock.com/svetikd, ©iStock.com/GetUpStudio

The post Ask an Advisor: I’m 49 With $500k in Savings But ‘I’m Concerned’ About Retirement Income and Annuities Are ‘Too Expensive.’ What Are My Options? appeared first on SmartReads by SmartAsset.

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