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Retirement becomes financially feasible when projected income exceeds projected expenses. Retiring at age 64 with $715,000 in a Roth IRA and $3,400 monthly in combined pension and Social Security benefits could be realistic based on typical investment returns and retiree expenses. However, this may not be true for everyone. Your current age, life expectancy, lifestyle expectations and other factors could make it more or less possible for you to retire at 64.
A financial advisor can help you estimate the expenses and income you can expect in retirement.
Pension and Social Security benefits of $3,400 a month, or $40,800 annually, can provide a solid foundation for retirement. Social Security is backed by the full faith and credit of the U.S. government, and these lifelong benefits are adjusted annually to keep up with inflation. Social Security can also provide benefits for your survivors.
Pension benefits are also highly reliable. The Pension Benefit Guarantee Corporation, a federal agency, protects retirees from losing their benefits in the event their pension plan runs into trouble. Like Social Security, some plans provide survivor benefits and adjust annually for inflation.
Assuming you are 60 years old now, the $715,000 Roth IRA balance could potentially grow to $937,219 by the time you are 64 if it generates a 7% average annual return. Applying the 4% withdrawal guideline, you can withdraw $37,489 the first year of your retirement with low risk of exhausting your savings in your lifetime, then adjust it upward each subsequent year to reflect the actual inflation rate, protecting your future purchasing power.
The $37,489 in annual retirement account withdrawals plus $40,800 from pension and Social Security total $78,289 in annual income to fund your retirement. Whether this will be enough to support your lifestyle and tax bill are the next big questions.
Your individual retirement expenses can vary widely depending on your desired lifestyle, travel plans, location, health and other factors. Surveys of what retirees actually spend produce a range of figures, The Bureau of Labor Statistics estimates the average retiree needs $60,087 annually for 2023.
Although the $78,289 you can likely expect in retirement income can cover these average figures, you may not be average. Another way to estimate retirement expenses is to peg them at about 75% of pre-retirement income. Assuming you are 60 now, you are likely earning about $65,936 a year, according to studies of average earnings by age. The 75% guideline suggests that $49,452 might be enough to cover your costs in retirement.
Another way to estimate retirement expenses is to budget based on your current actual expenses. Be sure to include major costs such as housing, transportation, food and entertainment. You can probably remove some costs, such as those related to work like commuting costs. You also won’t be contributing to retirement savings, and may have your home paid off. Also consider whether some costs, such as travel and healthcare, will rise.
Remember, these examples make a lot of assumptions. A financial advisor can help you determine an appropriate budget and strategy for your situation.
Taxes, a significant concern for many retirees, will be less important for you because your nest egg is in a Roth IRA. This after-tax retirement account provides tax-free growth and also lets you withdraw money without paying any income taxes. Your Social Security benefits may be tax-free as well, although pension benefits may be taxed.
Your retirement spending plan also needs to provide for private health insurance until you become eligible for Medicare at 65. Also think about buying a long-term care insurance policy, as paying for long-term care can be a significant burden for many retirees.
If you need more income for your retirement plan, one option is to delay retirement. Waiting until age 67 would allow your Roth IRA balance to grow to $1,148,134, assuming a 7% annual return. This would let you safely withdraw $45,925 the first year instead of $37,489. Also, you can increase your monthly Social Security benefit by 8% for each year you delay claiming it until age 70.
You may also have room to reduce expenses. Look particularly at housing costs. Housing is the largest expense for most people and also the most variable by location. Downsizing or moving to a less costly city or state can help make retirement affordable.
Consider using this free tool to match with a financial advisor if you’re interested in discussing the specifics of your situation with a professional.
Retiring at 64 may well be a feasible plan if you have $715,000 in a Roth IRA and can expect $3,400 monthly from a combination of pension and Social Security benefits. Projecting your likely income generation and comparing it to retirement expenses using guidelines and averages suggest you can cover your expenses with a cushion to spare. However, your specific situation may look differently depending on your desired lifestyle, travel plans, health status and other factors.
Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with 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.
To get a better idea of when you can retire, run your financial information through SmartAsset’s Retirement Calculator.
Keep an emergency fund on hand in case you run into unexpected expenses. An emergency fund should be liquid — in an account that isn’t at risk of significant fluctuation like the stock market. The tradeoff is that the value of liquid cash can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.
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