How to Boost Retirement Savings with the $1,000-a-Month Rule - Slavic401k (2024)

  • 401k plans, personal finance, savings, wealth management

Saving for retirement comes in many shapes and sizes, and strategies are not one-size-fits-all. Having a successful and beneficial retirement plan requires research, adjustments, and work from the participant.

Having a set-it-and-forget-it mindset when saving for retirement will only go so far. That’s why it’s important to try new approaches to make your money grow and work for you in the future. One example is the $1,000/month rule. Created by Wes Moss, a Certified Financial Planner, this strategy helps individuals visualize how much savings they should have in retirement. According to Moss, you should plan to have $240,000 saved for every $1,000 of disposable income in retirement.

As a general rule of thumb, you will withdraw approximately 5% of your retirement income every year for expenses. The Balance breaks down the numbers below:

Start with $240,000 and multiply it by 5%, which equals $12,000. Next, divide $12,000 by 12 months, which totals $1,000 per month.

Moss notes that this strategy is a rule of thumb, and depending on factors such as inflation, the stock market, Social Security, pensions, part-time work, and more, the total will vary throughout your lifetime.

Adjusting the Rule

Like most things in life, there are exceptions to the $1,000/month rule. For example, some people retire earlier than others, and some retire after the age of 62. Your retirement age will determine how much you should plan to withdraw each month, and will, therefore, impact the rule.

Someone who retires early in their 50s will have to withdraw smaller amounts each month for their retirement savings to last longer, and someone retiring after the age of 62 can afford to increase their spending.

Everyone – regardless of age – will have to watch market conditions and adjust accordingly as well. For example, years that experience high inflation will change the value of your dollar and require assessment and adjustment. The Balance notes that market changes will require individuals to adapt and change consistently, so be mindful of economic conditions.

Setting Yourself Up for Success

Knowing that your strategy will continuously change throughout your life, and adjusting as needed, is key to a successful retirement plan. While 5% withdrawals every year will last approximately 20 years for the average participant, many will need funds for a longer period.

Investing, rather than only storing money in a savings account, can help your dollars stretch longer and puts your money to work for you. Some examples of supplemental savings include:

  • Individual Retirement Accounts (IRAs): These accounts can be opened online through financial institutions like Fidelity and can easily be managed at your fingertips. The IRS sets contribution maximums for retirement accounts on an annual basis, and in 2024 the limits are listed as $7,000 for a Traditional IRA and $8,000 for those over the age of 50. If you can maximize these accounts every year, you can significantly improve your retirement savings for the future.
  • Health Savings Account (HSA): As you age, your health expenses will likely increase. Having an HSA can help you plan and cover those increasing costs with a tax-deductible account. In 2023, the contribution maximum was $3,850 for individuals and $7,750 for families. For participants over the age of 55, an extra $1,000 is added for catch-up contributions. By maximizing these accounts early, you will have health expenses covered in the future that won’t impact other areas of retirement savings, such as 401(k) plans, IRAs, and regular savings accounts.

Having a diverse savings strategy can help you pad current and future economic downturns, protecting cash and investments that can be used in retirement. Learn about the importance of diversifying your investments on the Slavic401k blog.

While saving for retirement does not have a one-size-fits-all approach, utilizing different methods, such as the $1,000/month rule, can help you reach your goals. Remember that saving, maximizing contributions, and planning will look different at various stages in your life, and utilizing resources like retirement calculators, can help you keep yourself on track financially.

Check out Slavic401k’s diverse catalog of calculators, including a retirement nest egg calculator and retirement planner calculator.

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Advisory services provided by Slavic Mutual Funds Management Corporation, an SEC-registered investment adviser. Registration does not imply a certain level of skill or training on the part of SMF or its representatives. Administration and record-keeping services are offered through Slavic Integrated Administration. Both entities are collectively referred to as “Slavic401k.”

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How to Boost Retirement Savings with the $1,000-a-Month Rule - Slavic401k (2024)

FAQs

What is the $1,000 a month rule for retirement? ›

One example is the $1,000/month rule. Created by Wes Moss, a Certified Financial Planner, this strategy helps individuals visualize how much savings they should have in retirement. According to Moss, you should plan to have $240,000 saved for every $1,000 of disposable income in retirement.

Is Slavic 401k real? ›

At Slavic401k, we provide business retirement plan savings solutions – and we've been doing it for over 35 years. Businesses come to us because of the value our retirement savings solutions provide their company.

How long will $300,000 last me in retirement? ›

Summary. $300,000 can last for roughly 26 years if your average monthly spend is around $1,600. Social Security benefits help bolster your retirement income and make retiring on $300k even more accessible. It's often recommended to have 10-12 times your current income in savings by the time you retire.

Is $800,000 in 401k enough to retire? ›

If you have substantial income from sources like a pension and Social Security, an $800,000 portfolio could last for many years. That's especially true if your expenses are low and you don't have significant health care expenses.

Can you live off $3000 a month in retirement? ›

That means that even if you're not one of those lucky few who have $1 million or more socked away, you can still retire well, so long as you keep your monthly budget under $3,000 a month.

Can I retire at 60 with $500,000? ›

The short answer is yes, $500,000 is enough for many retirees. The question is how that will work out for you. With an income source like Social Security, modes spending, and a bit of good luck, this is feasible. And when two people in your household get Social Security or pension income, it's even easier.

Is Slavic401k a good company to work for? ›

Slavic401k has an employee rating of 3.1 out of 5 stars, based on 42 company reviews on Glassdoor which indicates that most employees have a good working experience there.

What is the 401k trap? ›

What is the 401(k) trap? To start, you cannot take your money out of a 401(k) until you are 59 ½ years old without a penalty and taxes on your withdrawal. It's in a “lockbox” where you lose control of your money, generational wealth transfers, cost segregation, depreciation, and other tax benefits.

How many Americans are 401k millionaires? ›

Fidelity also reported that the number of 401(k) accounts with balances of at least $1 million rose in the fourth quarter by 20%, to 422,000 accounts; and by 41% for the whole year.

What is the average 401k balance for a 65 year old? ›

$232,710

Can I retire at 67 with 500k? ›

If you have $500,000 in a pre-tax IRA and expect $2,000 per month from Social Security, you may have enough money to retire at age 67. A half million dollars is a relatively modest nest egg, but it can still generate a comfortable income depending on your standard of living.

Can I retire at 65 with 500k? ›

Yes, it is possible to retire comfortably on $500k. This amount allows for an annual withdrawal of $20,000 from the age of 60 to 85, covering 25 years. If $20,000 a year, or $1,667 a month, meets your lifestyle needs, then $500k is enough for your retirement.

What is the average Social Security check? ›

Social Security offers a monthly benefit check to many kinds of recipients. As of December 2023, the average check is $1,767.03, according to the Social Security Administration – but that amount can differ drastically depending on the type of recipient. In fact, retirees typically make more than the overall average.

Is $6,000 a month a good pension? ›

With $6,000 a month, you have more money than the average retiree—Americans aged 65 and older generally spend roughly $4,000 a month—and therefore more options on where to live.

What is a good monthly retirement income? ›

Average Monthly Retirement Income

According to data from the BLS, average 2022 incomes after taxes were as follows for older households: 65-74 years: $63,187 per year or $5,266 per month. 75 and older: $47,928 per year or $3,994 per month.

Can I live on $2000 a month in retirement? ›

Retiring on a fixed income can seem daunting, but with some planning and commitment to a frugal lifestyle, it's possible to retire comfortably on $2,000 a month.

How long will $500 I last in retirement? ›

Yes, it is possible to retire comfortably on $500k. This amount allows for an annual withdrawal of $20,000 from the age of 60 to 85, covering 25 years. If $20,000 a year, or $1,667 a month, meets your lifestyle needs, then $500k is enough for your retirement.

Is $1500 a month enough to retire on? ›

While $1,500 might not be enough for non-housing retirement expenses for many people, it doesn't mean it's impossible to stick to this or other amounts, such as if you're already retired and don't have the ability to increase your budget.

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