Retirement Income: Get Paid $60,000 a Year from Interest on Your Savings — What to Do Now for a Comfortable Retirement Later
Written by
David Nadelle
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As concerns about the economy, inflation and the future of Social Security increase, more Americans are finding it difficult to save for their future. According to CBS News, U.S. Census Bureau data reveals that 50% of women and 47% of men aged 55 to 65 have no retirement savings to their name.
However, as unprepared as millions of Americans are for their sunset years, starting to save now will provide a more comfortable payoff in retirement than burying your head in the sand.
As a general rule of thumb, you should be saving between 10%-15% of your pre-tax income for retirement. However, if your goal is to live on interest alone, you’ll most likely have to sock more than that away and let compound interest do its thing.
For example, do you know how much you would need to save now to make $60,000 a year from interest in retirement? Using some general benchmarks — an assumed retirement age of 65 and no savings or additional income from Social Security or an employer-sponsored 401(k) — CNBC ran some numbers and came up with savings scenarios that people can use to earn $40,000, $50,000 and $60,000 annually in retirement interest.
How to Earn $60,000 Per Year on Interest Alone
To earn $60,000 per year in interest only, a 25-year-old person would need to save $2 million by the time they retire at age 65. In terms of monthly savings, one would need to put $1,004 away every month to reach that annual interest goal.
To get paid $40,000 yearly in interest only, CNBC maintains that you’ll need to save more than $1.3 million by retirement, saving $670 per month. To get to $50,000, you’ll need to save $1.6 million upon retirement. Starting at 25, you would need to save $837 per month to reach that goal.
These numbers assume an annual 6% return when you’re saving and a 3% rate for your interest-only retirement, that your investment portfolio mix will shift from risk-tolerant to conservative as you age, and that you’ll likely have a combination of stocks, bonds and cash when you retire.
What To Do Now for a Comfortable Retirement
Remember that saving for retirement isn’t a one-size-fits-all plan. Every saver has different financial burdens and comes into and out of money at different times in their lives. While it’s always better to start your savings early, many Americans recoup later, when they are making substantially more money than when they were young.
It’s never too late to build a nest egg, but if you want to reach that lofty annual retirement goal of $60,000 and can’t foresee saving anything close to $1,004 per month, you’ll need to rethink your retirement age and where you’re putting your money.
Already, older Americans are working longer and delaying claiming Social Security benefits to boost their retirement security. Holding off claiming Social Security will result in a larger monthly Social Security benefit, more savings and fewer years needed to make your retirement savings last.
As CNBC notes, research shows that benefits taken at age 70 are 76% higher than retirement benefits taken at 62. For someone whose full retirement age is 66, delaying Social Security until 70 will result in an amazing 32% increase in benefits.
Additionally, lowering your cost of living, saving where you can and investing moderately will help make up for lost investment time, as will eliminating debt, sticking to a budget, generating additional income and maxing out any retirement accounts along the way.
Most importantly, having a realistic notion of how much money you’ll need to live comfortably in retirement is essential. If it’s $60,000 and you’re already playing catch-up, then you better start saving now. If it’s less, starting now is still a smart, financially-fundamental idea.
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