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A 24/7 Wall St. reader asked how much they can spend on travel in retirement.
The reader has over $4 million invested, including $3.22 million in retirement accounts.
At a safe 3.7% withdrawal rate, his retirement accounts alone will provide $119,140 in annual income.
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Decisions about retirement withdrawals can have big consequences for your financial future. A 24/7 Wall St. reader is currently grappling with this issue and sent us a question asking for advice. The reader has more than $4 million in retirement savings, but wants to know how much they can safely take out of that account. He’s hoping he can afford to travel and enjoy life, but wants to make sure he doesn’t run short.Let’s take a look at the numbers to see how much is reasonable for him to spend — and how others can make these decisions themselves when faced with these choices. Always start by looking at the math Taking a close look at the numbers is the first key thing to do when deciding how much to withdraw from savings — and how much to devote to travel. Here’s how the reader described his situation:He’s 61 and already retired, but his wife who earns $150,000 plans to work for another five years.
He has $1.7 million in his 401(k). His wife has $1.2 million and contributes another $22,500 annually.
They have $320,000 in Roth IRAs, $400,000 in post-tax mutual funds, and $850,000 in cash and CDs
Their child has four more years left of college, $140,000 in a 529 account, and $60K in annual college expenses
He’ll be claiming Social Security at 62 and receive $32,000 and his wife will do the same
Their household spending, not including discretionary costs, comes in at $85,000 to $90,000.
If you do the math, this means he has around $3.22 million in retirement accounts, and another $1.25 million in other investments, although he needs around another $100K to cover college loan-free for their child so that will likely come out of savings. However, with his wife working and contributing to the 401(k) for another five years, her 401(k) account is likely going to grow over time as she won’t be able to access her funds until 59 1/2 without penalty. The good news is that his wife’s current income should cover most if not all of their expenses for the coming five years. And, when she doe