Almost all of us, at some point in our lives, have wondered how much money we’ll need to retire. It’s a pretty common question and a lot of people feel that $100 000 is a nice round number that would be quite comfortable living on through retirement. It’d cover a high-level of living expenses, as well as any additional indulgences such as travel, holidays, or gifts.
It may seem like you need to have worked two jobs your whole life, or have a rich inheritance to have this much through retirement. And, sure, you do need quite a bit of money saved to reach this point, but it’s not as much as you think!
We’ll cover all you need to know about retiring with a $100 000 a year income.
Is $100k a good salary?
In the US, the average salary is only about $53,490 a year (or $1020 a week), making $100 000 a pretty comfortable number to think about. However, as good as it may sound, it may not be enough for financial independence if you have dependents and are the primary breadwinner.
With a bigger family: you’ve got to plan for a bigger budget for all the necessary bills.
But if you can generate a $100k retirement income, you’ll be in pretty good financial shape. Better yet, if you can access a reputable financial advisor, you’ll have no issues making your retirement work seamlessly for you.
Want to know how to maximize your salary to achieve your retirement goals?
- Save wisely
- Spend comfortably
- Consider a microbusiness – in the US you can start one with less than $3000 a year, which is just a fraction of your monthly income
What taxes will you pay for a $100k salary?
Obviously, the amount of taxes on your retirement salary will depend on so many factors, such as your relationship status and state or country of residence.
For an idea of what you may be working with? You can use the IRS withholding calculator to figure out exactly how much you’ll be paying back to Uncle Sam.
But for an estimate? In Oregon, the state residents effective tax rate is about 25%, meaning you’ll remit up to $24 680 to the IRS every year with your desired income. This includes a 24% marginal tax rate that will eat your immediate additional income.
After calculating all necessary tax to pay, your after-tax income will still likely be around $75k.
Which isn’t too bad when considering it’s still roughly $20k over the average…
How can you retire with $100k in savings?
It definitely doesn’t sound like enough, but a third of Americans have less than that in their savings when retirement comes. However, the fact is: what you do with that money determines how long it will last and how beneficial it will be for you.
$100k in retirement can last up to 30 years if you stick to the general 4% thumb rule of financial planning in retirement. This rule suggests that retirees 65+ should withdraw, at maximum, 4% of their savings during the first year of retirement. While it doesn’t apply to everyone, it’s a good benchmark to follow to ensure your savings work for you.
How can you save $100k and more in just 5 years?
Yep, it might sound a little impossible, but it is achievable to save $100k in just five years if you are already earning a 6-figure salary. But if you’re not? Here’s a few ways to reach that savings goal and get you on your way to retirement:
- Prioritize your retirement savings account
- Minimize your expenses – it’s a good idea to cut down on that impulse shopping. A dollar saved is better in your account than it is spent on an unnecessary, low-quality item.
- Pay off your debts and interest
- Get a side hustle
- Start a business
How can you generate a $100k a year income for retirement?
The fact is, if you know how to generate $100k in the first place, you’ll have no issue retiring on that amount per year. Which is great for investors, financial advisors, and those who have no issue with money. But for the rest of us? Here’s some handy ways to turn what you currently have into a stable retirement income:
1. Invest in real estate
Real estate is arguably one of the best ways to invest, and if you managed to save that $100k in five years? It’s an ideal way to give yourself a steady and predictable cash flow in retirement. It’s a long-term investment that can serve your immediate family for generations to come.
You’ll also enjoy tax incentives, as expenses used to maintain the property can be deducted to lower your taxes. And considering that investment property will stick with you into retirement? You won’t have to worry about those big taxes in your next stage of life.
2. Look into ETFs & Mutual Funds
Indexed ETFs and Mutual Fund investments include portfolios of stocks that are carefully selected by an expert. Unlike individual stocks and other forms of investment, this kind of investment is made with the purpose of withstanding inflation and market volatility, to give you long-term gains. More so, investment diversity ensures that your money will definitely yield reliable and predictable returns in the future.
3. Individual stocks
If you’re comfortable with a little more risk with your investment that’s still under your control, individual stocks can still be a great investment idea. With just $100k at your disposal, you can acquire shares in multiple companies, spread across varying industries. Just like ETFs and mutual funds, you’ll want some diversity in your portfolio so you’ll have better long-term growth opportunities at your disposal.
Much to many’s surprise, lending is becoming a very popular way of making an income, especially if you have a significant amount of money at your disposal. By lending your money to peers and charging them a monthly or weekly interest rate, you can make good money, while helping out those in need.
Be sure the borrowers give you collateral to hold against the loan, however. That way, you don’t have to worry about reclaiming your money if they default.
There are so many unique ways to generate $100k a year for income through retirement. Many are also flocking to IRAs and some are even working small, part-time jobs through retirement to keep a stable source of income (want to know how to find a post-retirement job? Read our blog here). For more ideas on how to earn money in retirement? Check out our posts on How to earn money in retirement by selling your knowledge or 7 creative ways to make money in retirement.
Everyone dreams of the day they can retire, so they can finally experience real freedom, reduced stress, and the adventure of a whole new life ahead of them. But when it comes to the money side of things? Everyone gets a little bugged down in the details.
We hope this blog has helped you gain insight on how to retire with $100k a year income but, if you’re still feeling a little unsure, keep in mind that you can do anything, as long as you have a plan. If you can make time to sit down and go over your expenses and investment/employment ideas, you can get exactly where you want to be.