Crafting a Comfortable Retirement Budget: A Couple’s Guide
As you approach retirement, creating a comprehensive budget is crucial to ensuring a comfortable lifestyle. With $1.9 million in retirement accounts and a combined Social Security benefit of $62,400 per year, you’re off to a great start. However, it’s essential to consider both income sources and realistic expenses to build a complete retirement budget.
Factoring in Income Sources
Your combined Social Security benefits will provide a substantial income stream. Additionally, you can withdraw 4% of your retirement investments each year, adjusted for inflation, to generate a sustainable income. This could translate to $76,000 in the first year, increasing to $78,280 in the second year, assuming a 3% inflation rate.
Accounting for Expenses
To maintain your pre-retirement lifestyle, you may need to adjust your spending habits. A general rule of thumb is to multiply your pre-retirement income by 70% to 90%. Assuming 80% is accurate for you, your combined income of $138,400 would be sufficient to maintain your lifestyle if you were earning approximately $172,000 per year prior to retiring.
Tax Implications
As you don’t have a Roth IRA, you’ll owe income taxes in retirement. Using the married, filing jointly standard deduction of $32,200, your taxable income would be $106,200. You’ll owe taxes on 85% of your Social Security income, and your tax bill will be approximately $11,715 in the first year.
Planning for Long-Term Care
A significant expense to consider is long-term care, which could cost up to $94,000 per year for a semi-private room in a skilled nursing facility. To mitigate this risk, you may want to explore long-term care insurance, although premiums can be steep, especially if you start later in life.
Building a Comprehensive Plan
To ensure a comfortable retirement, consider consulting a financial advisor to help you create a tailored plan. They can assist you in navigating tax implications, long-term care costs, and other expenses. Additionally, maintaining an emergency fund and using SmartAsset’s retirement calculator can help you make informed decisions about your retirement.
Taking the Next Step
Finding a financial advisor doesn’t have to be daunting. SmartAsset’s free tool can match you with up to three vetted advisors who serve your area. Take the first step towards securing your retirement today.
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