I Retired With Less Than $1 Million in Savings: Here’s My Monthly Budget

Rayan Adam, a 65-year-old sales associate living in New Rochelle, New York, will be retiring later this year . Though he doesn’t make six figures, he’s saved around half a million for retirement and plans to continue growing his side hustle to support himself after he retires.

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Here’s what his monthly budget will look like .

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Retirement Income

Adam plans to retire later this year and estimates that he’ll receive around $1,500 a month in Social Security benefits . However, he wants to delay claiming these benefits until he turns 70. By doing so, he’ll increase his monthly Social Security income to approximately $2,400, which is an additional $900 per month.

“I’m not in a rush to claim my Social Security benefits since I’m still making money from my side hustle of selling used electronics online,” Adam said. “Right now, that brings in around $900 net each month, which is pretty good! But once I fully retire and make this side hustle my full-time thing, I’m hoping to make at least $1,500 a month from it.”

Besides his side gig income , Adam will also be withdrawing money from his 401(k) and Roth IRA to support himself in retirement.

Monthly Spending in Retirement

As Adam prepares for retirement, he’s also considering a move to Florida. This change would likely lower his living expenses , particularly his housing and potentially some of his other costs. Here’s what Adam estimates that his monthly expenses will look like in Florida.

• Rent: $900
• Electricity, Gas, Water: $125
• Internet: $60
• Car Expenses: $400 (including insurance, gas, and maintenance)
• Groceries: $350
• Entertainment: $150
• Miscellaneous: $100
• Health Insurance: $200

“I’m already looking at a few apartments in Florida that are less than $1,000 a month, which is much less than what I’m currently paying here in New Rochelle,” Adam said. “So that’ll easily lower my monthly expenses by around $1,100.”

Financial Worries After Leaving the Workforce

“To be honest, I’m not really that stressed about money. I think I’ve saved a good amount for retirement,” Adam said. “Also, my monthly expenses are quite low since my kids are all grown now, and I don’t have to worry about child care expenses or paying for their college tuition .”

And because Adam still plans to work on his side hustle in retirement, he’ll have some money coming in each month, which alleviates his financial stress.

How Much Do You Need To Retire?

While Adam believes he’s able to make $500,000 last in retirement due to his side hustle income and low monthly expenses, that amount may not be enough for you. And while there’s no one-size-fits-all formula to calculate how big your nest egg should be , there are some common guidelines and benchmarks you can follow.

1. The 4% Rule

The 4% rule is a popular rule of thumb for determining how much you can safely withdraw from your retirement savings each year without running out of money. According to this rule, you should aim to save enough so that your annual withdrawals add up to no more than 4% of your total retirement savings. For example, if you have $1 million saved, you could withdraw $40,000 per year. So, in Adam’s case, he should be able to withdraw $20,000 each year from his retirement accounts without running out of funds.

2. 80% of Pre-Retirement Income

Another popular guideline is to aim for a retirement income that’s around 70% to 80% of your pre-retirement income. This accounts for the fact that some expenses, such as work-related costs, will decrease or disappear entirely in retirement. For example, if you earned $100,000 annually before retirement, you might only need around $70,000 to $80,000 per year to live comfortably in retirement.

But of course, the exact calculations will entirely depend on your lifestyle in retirement. If you’re planning to travel the world and go on luxury cruises every three months, you might need significantly more. However, if you drastically cut down on expenses by moving from an expensive city like New York to a rural town in Kentucky, then you might not need as much as 70% to 80% of your pre-retirement income to live comfortably.

3. The 25x Rule

The 25x rule suggests that you should aim to accumulate 25 times your expected annual expenses. For example, if you estimate that you’ll need $40,000 per year in retirement, you would aim to save $1 million ($40,000 x 25).

The 25x rule is technically the same as the 4% rule. If you’ve saved 25 times your annual expenses, withdrawing 4% annually from this amount would theoretically provide you with a sustainable income.

This article originally appeared on GOBankingRates.com : I Retired With Less Than $1 Million in Savings: Here’s My Monthly Budget