Wealth Management & Financial Planning

Wealth Management & Financial Planning

How to retire on $500,000? The Overview

That may sound like a small fortune or an amount you have already surpassed. Regardless, a sound retirement is the combined management of your budget, tax bracket, volatility of your investment account, Social Security timing, inflation, changing needs and life expectancy of you and your partner. This will be the first article of a 10-part series with the last two parts dealing with how to set the process up and, finally, how to turn it on.


A Retirement Budget takes into consideration the amount of income you need in order to replace your standard of living.  Notice we did not say “replace your income” or a certain percentage of that amount, nor did we discuss replacing or maintaining a certain asset value. A successful retirement is all about replacing your standard of living.


Your budget will have two types of expenditures. There will be fixed expenses that will exist as long as you do such as: utility bills, cable, property taxes, groceries…the list can go on and on. These are known as carry costs to some and simply the cost of living to others. They will tend to increase with inflation over time.


Another part of your budget will diminish in cost and importance over time. This is what we call the social expenditures that include travel and fun.


The percentage you are taxed is based on the amount of actual income you have from all sources in a given year.  Working to control the amount exposed in any given year can be the difference between a successful retirement or not.


Volatility, not the average return on its own, is the enemy of distribution. When you take money out of an account rising in value, everything is good. When you pull money out during downside market volatility, bad things can happen.


The difference between a married couple taking Social Security at age 62 and waiting until age 70 can be more than $500k of additional income over their lifetime. The lower your balance is in your savings and investment account, the more necessary it is to get Social Security timing correct.


Inflation is the destruction of your purchasing power over time.  A dollar today won’t buy what it did 20 years ago. Some areas, such as technology prices, have actually gone down. However, overall inflation is an issue – especially with service-oriented costs.


Changing needs such as health care cost and living arrangements can make financial plans implode if not carefully thought out. Sudden changes need to be planned for up front.


Life expectancy is an odd part of the retirement equation.  We aren’t living that much longer individually, but we are, however, living longer on average as a collective.  That means we have many more 100-year-old people today than we did 20 years ago.  That trend will simply continue, and you may be one of them. Proper financial planning will need to be in place in case you are one of the lucky ones that live that long.


A successful retirement is a process that involves many coordinated, key steps. This is the beginning of the roadmap.


Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see our Disclosure page for the full disclaimer.

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