Last Updated Aug 24, 2011 9:14 PM EDT
- The method you use to convert your savings into income. There are three different ways to generate income, each having its own variations.
- Your age
- Whether you're married
- Whether you desire access to your savings for emergencies
- If you want to leave a legacy to children and charities
* GMWB stands for guaranteed minimum withdrawal benefit, a type of retirement income solution currently being offered by insurance companies.
Annuity purchase rates are as of March 1, 2011, using annuities priced on the Vanguard website.
Here's the same table for a 65-year-old man. For the annuities, I also assumed he elected a life-only annuity.
Here's the same table for a 65-year-old married couple. For the annuities, I assumed they elected a 100 percent joint and survivor annuity.
The above examples offer just an idea of the amount of retirement income you can generate depending on how you invest it. As you can see, there's a wide range. That's because generating retirement income to last for the rest of your life is part art, part science. There's really no single answer that would work best for your situation; you may want to use a combination of the methods described above. If you want to learn more about the various methods to generate retirement income from your IRA and 401k balances, please read some of the articles at the bottom of this post.
When you're planning for your own retirement, you'll want to do more refined calculations than what's shown above, considering the five factors mentioned at the beginning of this post, and annuity purchase rates that will be applicable when you retire. You might want to use an online retirement calculator to refine your estimates, or work with a financial advisor whom you trust.
You won't regret the time you spend learning how to generate retirement income; it's the foundation of your financial security for the rest of your life!
More on MoneyWatch:
- IRAs and 401: 3 Ways to Generate Lifetime Retirement Income
- IRA and 401k: Generate Retirement Income with Just Interest and Dividends
- IRA and 401k Retirement Drawdown: Don't Die Broke!
- IRAs and 401ks: Maximize Retirement Income with Immediate Annuities
- IRA and 401k Retirement Income: Increase Security with an Inflation-Adjusted Annuity
- Use a Variable Annuity to Increase Your Retirement Income