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At the age of 54, Thomas has already accumulated a notable $1.4 million in his 401(k). While this may appear to be a substantial amount, the real question is whether it will be sufficient to sustain his lifestyle throughout retirement. The experts suggest addressing this uncertainty by calculating expected expenses during retirement and understanding the withdrawal strategy for his nest egg.
Reverse Engineering Retirement Expenses
To determine how much should be withdrawn from savings, it’s important to reverse engineer the retirement income needs. This means first assessing how much money will be needed annually in retirement and then figuring out how large the total nest egg should be to sustain that level of income without depleting the principal amount.