Can you retire on 200k and live a comfortable life?
Yes, you could, but there are a few further questions you might want to ponder before pulling the trigger on retirement with those figures.
How much money is enough is a question on most people’s minds, especially as you move into and past middle age.
Although none of us knows when it’s all going to be over, when we reach our 40’s and 50’s retirement becomes a real possibility and potentially a looming goal.
This is mainly due to the state retirement age and when you can receive your state pension.
Maybe you have 200k in your pensions or Isa’s or other savings and wonder if this is enough.
Read on to consider some of these things you might need to think about if you have 200k available
What can 200k do for you
Whether you can you retire on 200k all depends on what you want that 200k to do for you.
A few key questions to ponder
- What are you expecting to do in your retirement?
- How much are you expecting it to cost?
- How long do you think you need the money to last?
- Will there be any other sources of income?
- What are your options if things go wrong?
Being crystal clear on what you want 200k to do for you will help with many of your planning assumptions.
You could use the 4% rule as a planning assumption and guesstimate that if that £200k was invested in the great companies of the world, it might return something like 8k a year for about 30 years.
But that is an assumption with quite a few caveats.
We have no idea that the markets will return that.
More importantly, whether you will be able to cope with the ups and downs without panicking and selling everything at a loss on the way.
This is where knowing your numbers is going to help.
What are your basic food, water, shelter and medical needs? What you need to survive.
Up from this, what would you need to make life comfortable?
How much will 200k cover these three levels, and for how long?
This WHICH report helps identify what those levels might be in the UK.
If there is a shortfall, then you might need to plan to
- Earn more
- Work for longer
- Lower your lifestyle
Which one of these would you prefer?
Plan for a long life
Unless you know better, the chances are that you are probably going to live a long life.
If that is the case, you need to consider that the 200k you have will need to last longer into your old age.
And as you get older, it may be that you are doing less and so needing less money but that your care needs go up needing more money.
What you can be sure of, though, is that inflation will play a constant drain on your money. The price of things and, more importantly, the cost of items you can’t do without food, water, shelter, medicines are likely to keep going up and up.
So, planning on a long life with the ongoing effect of inflation on your cost of living should help you understand or appreciate the ongoing challenge of funding your ideal life in retirement or off £200k.
One way to plan for inflation is to use the rule of 72.
The rule of 72 can be used to estimate when your money will double – this is the fun part of figuring out how your money will grow.
The rule of 72 is also a way to determine how long it will take for your money to half in value!!
Take 72 and divide it by inflation.
So, let’s say 3% inflation; it is a fairly average rate. Sometimes it’s been higher and sometimes lower.
72/3 = 24 years.
So, your 200k will half in value or purchasing power in 24 years. That doesn’t sound like fun, does it?
So, imagine you will live for another 24 years at least, then you might find that everything has doubled in price over that period.
That’s why your 200k needs to match or ideally beat inflation to provide you with a rising income.
The short answer is that cash will not do this.
Assets like the below might help provide you with the growth and or income you need over the long term as long as you won them or a lump sum if you sell them.
Physical assets like
Digital assets like
- Online shops with or without real stuff.
How many of these assets do you currently own or are working towards owning?
Plan for a full life
Don’t cheat yourself out of what you really want, what you really really want?
Many of us are banking on working for 40 or so years of our lives and then really doing what we want to do when we retire.
Saving up what you have always dreamed of for our old age.
Hmmm, a potentially risky plan if old age isn’t quite what you expected.
Why not make sure that your life and finances can create the things you have always wanted now!
Why not plan to do the things that would really make your life amazing now!
If you were looking back on your life, what do you think would have made it a great life?
What goals do you think you would have achieved?
If you can think of any, what might your best guesses of a great life be?
What might you have liked to achieve in the past or achieve in the future?
Here are a few areas where you might like to think about what would make a great life looking backwards or looking forwards
- Health and fitness (complete a marathon, keep fit and active, keep a good weight)
- Recreation and hobbies (learn how to paint, craft, sew, paddleboard, open water swimming)
- Family and Friends (plan that summer reunion, visit that distant relative or friend)
- Romance and Relationships (find your soul mate, start or grow a family, find new friends after 40!!)
- Finance and net worth (get out of debt, grow a nest egg, save for big occasions, make work optional)
- Career and business (get that promotion, start that side hustle, work part-time or volunteer)
- Personal development (order a meal in French, learn how to write a book, create websites, cook great food)
- Spiritual goals (create more quiet time, reflection or reading days/weeks)
If you had a plan for all these, how would that feel?
Any better than just bumbling along, hoping that one day it might happen?
Planning to achieve what you want is half the battle in attaining them and help indicate if you can retire on 200k and still achieve them.
It all starts with a plan; who knows where it will take you.
Here are a few ways to plan for a great life.
Set your GAME Plan
By the way, this is exactly what we do at Financially Happy.
We help people design their own GAME Plan to achieve their great life now.
Picture and decide on Goals in every area of their life.
Identify the Actions needed to achieve those goals, including anticipating what will likely be the barriers in the way, looking at internal and external roadblocks.
Understand the Means they currently have or need to create to reach their goals and ideal lifestyle. Figuring out how you can retire on 200k or another amount and achieve what’s important to you.
Finally, starting the Execution of the plan. Reviewing and adjusting as you go, learn and adapt to the realities of life.
If this sounds like something you would like to explore, achieving more of what’s important to you, why not set up a call here.
FAQ: Can you retire on 200k?
-You possibly could if you had a lifestyle that the returns from 200k could fund. These might be something like 8k a year if you used the 4% rule of thumb.
-You would then have something like 10-12 years to wait for your state pension to kick in if that was part of your calculations.
Probably carefully to make sure the money lasts as for as long as you need it to.
Make sure the money is invested in something that provides the balance you need between risk and reward.
Make a GAME Plan to make sure the money helps you live the life you really want.
Generally speaking, $200000 would bring you an income in the region of $8k.
You would then need to figure out if is this enough for you to retire on or if you might need to supplement it with other income.
Yes, you could retire at 60 with 200k, but it would likely be a fairly modest retirement. You would likely need to supplement your income with other sources in order to live comfortably which may include a part-time job or drawing on your savings.
How long will 200k last in retirement?
This will depend on a number of factors including your lifestyle costs, what or how your money is invested, and how long you live, particularly considering any health implications. Generally speaking, you might be able to withdraw a sustainable income of $8000 from your 200k, does this sound like enough for you?
Retiring on 200k might mean a fairly frugal lifestyle if you are not able to supplement your income from other sources.
Yes, you could retire with 200k in a 401k, but it would likely be a fairly modest retirement lifestyle. You would likely need to supplement your income with other sources in order to live comfortably.
This all depends on what you want your life to look like in retirement at 60.
Working out what your ideal yearly lifestyle costs will be at 60 will help you identify how much you need to save for retirement.
The rough planning rule is to take your yearly send and times it by 25. This will give you a rough starting figure of how much you might need to build up in savings and investments.
Another way is to figure out what you need yearly and create income streams that bring that in. Things like pensions, investments, rental income, on and or off line businesses.
That depends a little on what sort of lifestyle you are hoping for with a fund of 300k. With a bit of planning, it may well be possible.
You might expect a sustainable income of something like $12,000 per year. Would that be enough for you?
Is 200k enough to retire?
Whether can you retire with 200k is all about what your lifestyle costs are compared to what income you have coming in, including what your 200k can generate.
Being very clear on your cash flow, money in money out, and what 200k and other sources of income will provide to help you understand if 200k is enough to retire.
Summary: Can you retire on 200k
You could retire on 200k, which might give you an income of 8k.
Would that be enough for you to do all the things you want to do?
Figuring out what that 200k might allow or not allow you to do will help you understand if this is enough.
Planning for a long life, unless you know better, will also help understand is this enough to last for potentially 30+ years.
The longer the money needs to last, the more you might need to think about managing it and or create more to ride out any rough spots.
Plan for the life you want, not just the one you think you can afford. It’s a lot more fun doing this and will spur you to achieve more exciting things.
Set your GAME Plan
Figure out your GOALS, take Action, understand your current and needed Means and Execute and review the plan as you go.
Anyway, those are my thoughts on can you retire on 200k; let me know yours in the comments below.
Thanks for dropping by.
Life and Financial PlanningCan you retire on 200k?Can you retire on 200k?
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