“I figure I’ll need at least $3,500 a month in retirement, which my Social Security and savings ought to provide.” (Photo subject is a model.) – Getty/iStockphoto
I read your column regularly. I’m hoping you might be able to give me some advice. I’m 57 and inherited some money last year. It enabled me to start saving the maximum in my 401(k) and in a Roth IRA. I have almost no retirement savings.
Currently, I have $8,000 in my 401(k) and $17,000 in my Roth IRA. I’m contributing $8,000 a year to both. I am using a $50,000 inherited IRA to fund the Roth by taking out about $5,000 per year over 10 years. To come up with the rest, I’m using my $3,000 annual bonus.
I plan to work until I’m 70, at which time I’ll start taking Social Security benefits and drawing down my retirement savings. I earn $50,000 a year. I live on $2,500 a month. I figure I’ll need at least $3,500 a month in retirement, which my Social Security and savings ought to provide.
The wildcard: I have $85,000 in a high-interest savings account earning 4%. Several financial planners want to manage those assets in a taxable brokerage account, but I am reluctant to pay their fees. I would be comfortable using a robo adviser like I use with Vanguard for my IRAs.
I have $5,000 in emergency savings, which I’d like to increase to $15,000 or six months worth of living expenses. That would leave $70,000 to invest in a taxable brokerage account. I’m nervous and haven’t pulled the trigger on the brokerage account.
I like the guaranteed returns in the high-interest savings account, but I know I need to get this money into the market in order to supplement my retirement savings. The question is when and how much. All at once or a little at a time, to take advantage of dollar-cost averaging?
You can make a lot of progress in 13 years, especially given that you are now likely at your peak earning years. – MarketWatch illustration
Walk your own race.
Saving money for retirement is a slow, laborious and often boring process, but it’s also hair-raising when the markets go through the kind of roller-coaster they experienced in April and, for many, it’s exciting to see their balance increase as the years go by.
The best approach is to keep doing what you’re doing. Set your contributions, make a plan for retirement, which you can revisit every couple of years, and live your life to the fullest. Including your high-yield savings account, you have $110,000 set aside.
You’re going to maximize your Social Security by waiting to claim it until you’re 70, and you’re planning to continue working. You can make a lot of progress in 13 years, especially given that you are now likely at your peak earning years.
The average Social Security income for retirees is around $2,000 so given your expenses and plan to keep working for the next 13 years, all going well, and your retirement pot — savings, 401(k) and IRA — you may not even have to withdraw the full 4% a year from your investments.
Comparison can be the enemy of motivation. To put your finances in some context: The average 401(k) balance for Generation X, those aged between 45 and 60 in 2025, is around $192,000, while the average IRA account is $104,000, according to Fidelity.
You’re now living on $2,500 a month, but say you will need $3,500 a month in retirement. You know your own lifestyle better than anyone, but that additional $1,000 represents a sizable chunk of your current income so I implore you to examine where that extra money is going.
Given your nerves about putting your remaining cash into the market, a dollar-cost averaging strategy, consistently investing a set amount of money at regular intervals, sounds like it could benefit you. The 4% savings account is barely keeping up with inflation. Aim for at least 7%.
You could gradually invest that $70,000 over 12-18 months using a robo adviser and, if there was a market correction like the one we experienced in April, you could double your monthly investment. It could also help get you used to the market’s sometimes capricious nature.
That $70,000 would be worth approximately $160,000 in 13 years, if you had a 6.5% return. With that same rate of return, your 401(k) would be worth around $203,000 and your Roth IRA would have $182,000 in aftertax funds. That gives you a grand total of $545,000.
Applying the 4% rule — withdrawing 4% the first year and adjusting that upwards to account for inflation in subsequent years — your retirement savings would last you 30 years (assuming you withdrew around $21,800 a year). That, plus Social Security, meets your goal.
Even with that 4% withdrawal rate, all things being equal — down years and up years balancing themselves out — your retirement fund would cross the $800,000 mark by your mid 90s. That assumes your theoretical 6.5% return outpaces your withdrawals.
