Here’s How Much You Need To Retire With a $250K Lifestyle

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Wanting to retire with a $250,000 annual lifestyle is more than about covering the basics. You probably want to retire with a certain level of comfort and activities like travel that offer more flexibility that’s in line with what high earning professionals are used to.

If you want to aim for this much retirement income, sometimes it may not make sense to follow traditional advice. Sure, there’s a number you should aim for to be able to afford this lifestyle, but you also need to think about whether you need $250,000 in the first place.

What a $250K Retirement Looks Like

Yes, you want to live large, but what does it mean to have $250,000 in income during your retirement years?

With this amount of money, you’re looking to pay for things beyond the basics like housing and healthcare. At this income level, you’re probably looking at discretionary moves like buying a vacation home, dining out frequently, helping out your adult children, traveling internationally and finding ways to give more to charitable causes.

There’s nothing wrong with wanting to sustain a high quality of life. But if you want to keep this type of discretionary spending high, then you need to dial in how much you need for your nest egg.

The Math for a $250,000 Per Year Retirement

Most people have heard of the 4% rule, where you can withdraw 4% of your portfolio in the first year of retirement, then adjust it for inflation for each year afterwards. In theory, the amount in your portfolio should last at least 30 years or more.

The rule’s creator, William Bengen, has since “updated” the rule to be closer to 4.7% based on expanded historical research, as shown by this Barron’s article.

Using this guidance that means you’ll need around $5.3 million in your retirement accounts. Of course, you may need to adjust this number based on other factors like taxes, required minimum distributions (RMDs) and market volatility in any given year.

Strategies You Can Use To Reach a $250K Lifestyle

You can build multiple income streams and use advanced tax strategies to help you reach a $250,000 lifestyle without having to earn millions of dollars.

To start, you can work on setting aside money in a Roth IRA. And if your income is too high, you can do Roth conversions in your lower income years to prevent paying as much taxes. That’s because when you transfer funds from a Traditional IRA to a Roth IRA, you are transferring pre-tax money to an account with post-tax dollars.

Or, you can work with a professional to figure out a more strategic way to withdraw your retirement funds so you’re more likely to stretch those dollars instead of losing it to taxes.

Finding a way to earn passive income can also help. Many people start businesses that can run with minimal input. Another popular way is to invest in real estate. You don’t have to purchase properties and be a landlord; Some other ways include real estate syndications, hard money lending or tax lien investing.

The idea here is to offset some of what you need to have in your retirement accounts so that you can reduce the amount you’ll need to withdraw from them.

Coast FIRE for High Earners

You could leverage coast FIRE, where you save aggressively when you’re younger and “coast” into retirement once you’re reached a certain amount in your retirement accounts without contributing to anything else.

The idea is that you let the magic of compound interest work for you. If you’re targeting a multi-million dollar portfolio and aren’t a super high earner, it could be possible to reach your final goal.

Ultimately though, the exact amount of money you need during retirement depends on your lifestyle goals. So before you aim for $250,000 per year, see if you need that much in the first place.

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