How Much Should You Have in Your 401k to Retire at 55?

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Factors Affecting 401k Savings for Retirement at 55

To determine how much you should have in your 401k to retire at 55, consider several factors:

  1. Expected Retirement Expenses: Estimate your annual retirement expenses. Aim to have enough savings to replace at least 75% of your pre-retirement income, or 50% if you’re a single widow or divorcee.
  2. inflation: Account for inflation, especially if you are in good health and expect a longer retirement period.
  3. Social Security Benefits: Remember, you cannot access Social Security benefits until age 62.
  4. Additional Retirement Income Sources: Include other income sources like pensions, investments, or part-time work.

Calculating Your 401k Savings Requirement

  1. Estimate Annual Retirement Expenses: List your expected annual expenses during retirement.
  2. Determine Income Replacement Needs: Calculate 75% (or 50% for single widow/divorcee) of your current annual income.
  3. Adjust for Inflation: Increase this figure to account for inflation over the years until you reach 55 and beyond.
  4. Subtract Expected Social Security and Other Income: Deduct anticipated income from Social Security (post-62) and other sources from your total retirement income needs.
  5. Calculate Total Savings Required: The result is the total savings you need by age 55.

Using an Annuity with GLWB

An annuity with a Guaranteed Lifetime Withdrawal Benefit (GLWB) can be beneficial:

  • Automated Withdrawal Process: It automates the withdrawal process, making budgeting simpler.
  • Inflation Adjustment: Some annuities offer increasing payments to keep up with inflation.
  • Longevity Protection: Ensures you do not outlive your savings.

Example Calculation

  • Current Income: $100,000/year
  • Income Replacement Need (75%): $75,000/year
  • Adjusted for Inflation (Assuming 3% annual inflation for 10 years): Approximately $100,450/year
  • Less Anticipated Other Income: Assume $20,000/year from other sources
  • Annual Savings Required: $80,450/year
  • Total Savings Required by Age 55: Multiply annual savings required by the number of years expected in retirement.

Helpful Tool: How much will my 401k pay me per month

Conclusion

To retire at 55, calculate your savings requirement based on your income replacement needs, adjust for inflation, and consider using an annuity with GLWB for stable, inflation-adjusted income. Ensure your 401k and other retirement savings meet these requirements. For personalized calculation and retirement planning, contact us today for a free quote.

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Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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