How Much Does It Take to Retire Comfortably on a $5k, $10k, or $15k/mo Budget?

Have you ever been told that you need to have at least a million dollars for you to retire comfortably? Many people have been frustrated by the idea that there's an arbitrary magic number they need to reach to retire. The truth is, retirement planning isn't one-size-fits-all, and the amount you need depends on many factors.

James breaks down the process of determining your retirement savings by exploring different income levels and scenarios.

Meet Elon and Elona Dusk, our fictional couple who are both 65 years old. They're considering retirement and want to determine how much they need to comfortably retire with different monthly income goals.

👉 $5,000 per Month: If they aim for a monthly retirement income of $5,000, they have Social Security benefits that would provide a combined $4,443 per month at age 65. This leaves a shortfall of $557 per month or $6,700 per year.

Assuming a 5% withdrawal rate, they would need a portfolio of approximately $134,000 to make up this difference. However, if they waited until their full retirement age, they could rely entirely on Social Security, eliminating the need for a portfolio.

👉 $10,000 per Month: If they want to spend $10,000 per month in retirement, their Social Security benefits at age 65 would be $4,065 after taxes, leaving a shortfall of $5,935 per month or $71,220 per year.

With a 5% withdrawal rate, they would need a portfolio of approximately $1,583,000 to bridge the gap. Waiting until retirement age would decrease the required portfolio size to around $1,447,000.

👉 $15,000 per Month: Lastly, if Elon and Elona want a monthly income of $15,000, their Social Security benefits at age 65 would provide $3,877 after taxes. This leaves a shortfall of $11,123 per month or $133,476 per year.

With a 5% withdrawal rate and a 15% effective tax rate, they would need a portfolio of approximately $3,140,000 to cover their expenses. At full retirement age, this portfolio requirement would decrease to about $3,000,000.

The key takeaway here is that your retirement savings target can vary significantly based on factors such as your Social Security benefits, age of retirement, and desired income level. Small adjustments in your claiming strategy can result in significantly higher benefits, reducing the burden on your portfolio.
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⏱Timestamps:⏱
0:00 Intro
1:16 Different perspective
1:57 Elon and Elona
2:42 5k per month
7:45 10k per month
13:40 15k per month
18:44 Inconsistent expenses
19:41 Understanding important factors
20:21 Outro

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Worried about retirement?

[vividpsychosis]

The fact that they tax our social security benefits is absolutely bonkers.

[JohnJohn-wrjo]

Retirement is no different than pre retirement. Its not your income but your spending habits that determine your lifestyle.
I have family members that died below the poverty level owing more than their net worth. Made good money their entire careers but lived in debt and above their means so were always in trouble financially. Others made much less but lived debt free and ultimately had a better retirement because of it.

[CheckThisOut]

Advice: Upon retirement, do NOT be afraid to spend money. Not stupidly, of course. But your health-ability to spend on what you want will go down as you age. EG: I am renting two motorhomes next summer for a family trip. Total cost: $10k+, and worth every penny.
As Carson (from Downton Abby) says, “In the end, memories are all we have.”

[franciscirillo]

fully retired and living off of my dividends. I started investing in 1958 in growth and transitioned 15 yrs ago into dividend aristocrats paying stocks. No regrets and financially free. Life is good while helping the less fortunate.

[slowmads]

My husband was laid off at age 62 and took his SS as finding a new job in his career would have been difficult, if not impossible. I waited until I was 70. Our combined SS income of $70K annually is enough for us to live a good life. And before we settle into that good life, we are enjoying a GREAT life of full-time traveling and spending an additional $40K a year from our investments to do so for as long as we’re physically able. Waiting was the best thing for ME (since I’m likely to outlive him) and for US.

[eiketrauernicht]

Insurance broker from Germany here. I just want to say i love your video's aesthetics. I can't comment much on american social security and Roth IRAs etc but the delivery is absolutely on point. Big inspiration. Thank you

[CheckThisOut]

This is one of the BEST YouTubes on financial retirement.
My Simple Plan:
I retired at age 72 but started taking SS at FRT (67).
My income dropped by 60% upon retirement, but we have NO debt and we were living below our means for many years. I worked until we both could be on Medicare (wife is younger) and I saved/invested 35% for the last ten years. By living below our means, we transitioned successfully into retirement. I simply monitor our bank accounts each month. They have still been going up slightly. I haven’t been “fun spending” as much, but all is well. I am using QCD’s to cover my RMD’s (to Teen Challenge Ministry).
James’ advice is solid.

[lionmangolf]

Biggest hurdle retiring at 55 is health insurance.

[carolinecollins]

Something to keep in mind for couples who are planning on living on their combined social security payments without other investments- when one of you dies, the other will only get the larger check. So, in the example mentioned in this video, the smaller $2000 benefit would go away and the survivor would only have $3000 to live on. That would be a big adjustment if there weren't other assets to make up the difference.

[johngill]

Great job 👍

This actually basically shows the whole concept of retirement planning

[MResearch]

Very nicely done video, showing, at a high level, the way social security decisions interact with portfolio needs… without getting caught in the weeds.

One set of “weeds” - particularly for folks focusing on that first $5K/mo scenario since it has minimal portfolio needs - don’t forget to factor in onetime expenses like replacing the roof on your home or replacing a car. No portfolio means you must have a larger emergency fund to cover these needs.

[topofmindwithterri]

I love how "just wait to collect Social Security and keep working" makes it sound like everyone has a choice. Ageism is real, companies love to lay off older workers and hire new college grads.

If you can wait, and stay employed, you are very lucky. If you cannot delay, take it earlier and cut expenses where you can.

Rarely in these types of videos does anyone talk about how Social Security is taxable income.

[MetHerInBaghdad]

You put out exceptional videos! They open my eyes to a lot of things I never considered before.

[davidfolts]

Thanks, James; your videos are always a special treat of well-constructed financial thinking.

[watchin-stoof]

Have you done a video where people just ignore social security? Then do a range from 45 55 and 65 retirement age

[DWilliam]

Enjoy your videos. I’m lucky, I’m retiring next year at 59 with 2 pensions that will pay me $9500 a month, 850K in savings/401K/403B and a paid for Condo. I’ll collect SS early and collect $2800 a month. My health benefits are picked up by the union and all I’ll pay is copayments until 65. I’ll also pay no state or city taxes on my pensions.

[michaelcatalano]

$15K a month is a scenario that will not remotely apply to 99% of retirees. And to those it does, they do not need to be watching a video like this.

[jdenino]

The government also takes Part B Medicare premiums out of your social security check, for 2024 that comes to $175 a month and you have to pay Part B premiums. Then you need a Medigap policy and a drug plan....That's another $200 a month.

[Sylvan_dB]

Basically, take your annual expenditures, subtract income sources like social security, multiply by 30x and that is what you need in your portfolio. That's reasonably conservative. Multiple by 20x is aggressive. The "4% rule" is 25x.

[TheFirstRealChewy]

I live in a state where social security benefits is taxed.

If you have the option of waiting a few years more before retiring, and that will greatly improve your situation, then do it. Waiting is not always possible and its harder to go back to work in your retirement years.