Your comfort in retirement depends on your ability to satisfy wants and needs. With more financial resources, you’re better prepared. But you might not need as much as you think.
Retirees often leave the workforce with about $300,000 in retirement assets. The median household income for people aged 55 to 64 is about $134,000, according to data from the Federal Reserve. The average household income is about $408,000.
So, what might retirement look like, and how long will the money last after you start spending?
$300k is sufficient for many people to retire, in part because you can avoid some of the biggest tax hurdles that may arise for more wealthy retirees. That said, whether or not it’s enough depends on your circumstances (spending levels, location, health, and more).
Your resources are the key to understanding your retirement finances. For most people, resources consist of two things:
Your resources need to last for your entire life. You can’t predict how long you’ll live, but you can make some educated guesses based on reasonable assumptions. After getting that information, you can decide if you’re ready to retire and how much money you have to spend.
Start by taking inventory of your resources. That may include creating an account with the Social Security Administration (SSA. gov) and learning about your Social Security retirement benefit. If you have a pension, it’s wise to contact your employer to learn how much income you can expect at different ages.
Your income forms the base of your retirement strategy. Most of the time, you get paid as long as you live, which is helpful if you live a long time.
But Social Security and pensions might not be enough to live on. Say you get $2,000 per month from Social Security. Will you be comfortable? For households getting two payments, that’s an excellent start, and it might be sufficient. Still, you may need to supplement those payments by spending from your assets.
You want to retire with an annual income of $300,000. That’s a good goal for a comfortable retirement, but how much money do you need to save to reach that goal? Let’s look at the different ways to save money and see which one works best.
The Big Picture: Your Retirement Savings Target
Depending on which withdrawal strategy you choose, you’ll need between $3.75 million to $7.5 million to generate $300,000 annually in retirement income. That’s a big difference! The method you select dramatically impacts how much you need to save.
Here’s what you need to know about each approach:
Using the 4% Rule
According to the famous 4% rule, you should take out 4% of your retirement savings every year. This is one of the most common ways to save for retirement.
Formula: $300,000 ÷ 0.04 = $7.5 million required
Pros:
- Simple to understand and implement
- Widely accepted in financial planning
Cons:
- No guarantees whatsoever
- Market downturns could seriously deplete your funds
- Doesn’t account for changing spending patterns in retirement
The 4% rule works best for DIY investors who are comfortable with market risk and have a large enough portfolio to withstand market fluctuations. If you prefer certainty or can’t afford uncertainty, this might not be the best approach for you.
Fixed Index Annuity with Guaranteed Lifetime Withdrawal Benefit (GLWB)
Annuities—specifically fixed index annuities with a Guaranteed Lifetime Withdrawal Benefit—are the only retirement plan in the United States that contractually guarantees you’ll never run out of income Unlike investments that rely on market performance, a GLWB provides a paycheck for life
How it works:
- Decide how much annual income you want ($300,000)
- Look at the annuity’s guaranteed withdrawal rate
- Divide your desired income by that rate
Examples:
- At 5% withdrawal rate: $300,000 ÷ 0.05 = $6 million needed
- At 8% withdrawal rate: $300,000 ÷ 0.08 = $3.75 million needed
Pros:
- Guaranteed income for life
- Protection from market downturns
- Higher potential payouts than the 4% rule
- Peace of mind knowing you can’t outlive your money
Cons:
- Less liquidity than traditional investments
- Fees can be complex and sometimes high
- Limited upside potential compared to pure stock investments
Annuities work best for retirees who want predictable income to cover daily expenses and peace of mind. If you prefer keeping full control over your assets and prioritize liquidity, you might want to explore other options.
Social Security + GLWB Combo Strategy
For high earners, Social Security provides a meaningful baseline income. We can calculate how much additional investment is required with a GLWB annuity to reach $300,000 annually.
Social Security Benefits:
- Maximum benefit at full retirement age (67) in 2025: about $4,873/month (~$58,500/year)
- If delayed until age 70: about $6,800/month (~$81,600/year)
Here’s how much you’d need to save when combining Social Security with an annuity:
| Retirement Age | Social Security Income | Remaining Need | Required Savings @ 5% | Required Savings @ 8% |
|---|---|---|---|---|
| 67 | $58,500 | $241,500 | $4.83 million | $3.02 million |
| 70 | $81,600 | $218,400 | $4.37 million | $2.73 million |
By combining Social Security and a GLWB annuity, the savings required drops significantly compared to relying only on annuities or the 4% rule. At age 70 with an 8% GLWB rate, a retiree needs just $2.73 million to reach $300,000 in annual income!
Can You Really Retire With Just $300,000 in Savings?
I’ve seen some confusion about this topic. Some people want to know if they can retire with $300,000 saved up (not as a yearly income). The answer is: it depends on your situation.
With $300,000 in retirement savings and using the 4% withdrawal rule, you could generate about $12,000 per year in income. For most people, that’s not enough to live on by itself, but when combined with Social Security benefits, it might work for some.
For example:
- If you have $300,000 in pre-tax retirement savings
- You withdraw 4% annually ($12,000)
- You and your spouse each get $2,000/month in Social Security ($48,000/year combined)
- Your total cash flow would be $60,000 per year
For many retirees with low-cost living situations and small spending needs, $60,000 might be enough. At this income level, you may not have to pay any or very little federal income tax, which means you can spend almost all of your money.
Alternative Income Sources to Consider
Dividend Stocks (4% Yield Target)
If you invest in high-dividend stocks yielding 4% annually:
Formula: $300,000 ÷ 0.04 = $7.5 million needed
Pros:
- Potential for capital appreciation alongside income
- More liquidity than annuities
- Dividends might increase over time
Cons:
- Dividend income isn’t guaranteed
- Stock volatility affects your principal
- Companies can cut dividends during economic downturns
Real Estate Rental Income
If rental properties generate a 6% net return (after expenses), you need:
Formula: $300,000 ÷ 0.06 = $5 million in property equity
Pros:
- Passive income stream
- Potential inflation hedge
- Tax advantages through depreciation
Cons:
- Property management responsibilities
- Tenant risks and vacancies
- Maintenance costs can be unpredictable
Don’t Forget About Inflation!
One thing I can’t stress enough is accounting for inflation. At a 3% annual inflation rate, what feels like $300,000 today will buy significantly less over time:
| Years Into Retirement | Equivalent Purchasing Power of $300,000 |
|---|---|
| 5 Years | $258,000 |
| 10 Years | $223,000 |
| 15 Years | $193,000 |
| 20 Years | $166,000 |
| 25 Years | $144,000 |
To protect against inflation, consider:
- Annuities with inflation riders
- Social Security’s built-in cost-of-living adjustments (COLA)
- Growth investments that can outpace inflation
- Real estate investments that can increase rents over time
Additional Insurance to Consider
When planning for retirement, don’t overlook these important insurance types:
- Long-Term Care Insurance: Protects your assets from nursing home or home health costs
- Bridge Health Insurance (if under 65): Covers healthcare costs before Medicare eligibility
- Medicare + Supplements: Reduces surprise medical bills by filling gaps Medicare doesn’t cover
- Life Insurance: Covers estate taxes, creates legacy wealth, or replaces income
My Bottom Line
To secure $300,000 a year in retirement income, you’ll need anywhere from $3.75 million to $7.5 million, depending on your method. An annuity with a GLWB provides the lowest required investment and the only contractually guaranteed income for life. Other methods can work but require more capital and carry more risk.
Remember, retirement planning isn’t one-size-fits-all. Your specific needs will depend on:
- Your desired lifestyle
- Where you plan to live
- Your health situation
- Whether you’re retiring alone or with a partner
- Your risk tolerance
- Your desire for leaving an inheritance
I always recommend speaking with a financial advisor who can help tailor a retirement strategy to your specific situation. They can help you determine exactly how much you’ll need to save based on your unique circumstances and goals.
Frequently Asked Questions
Can I retire with just $300,000 in savings (not annual income)?
Yes, but it depends on your other income sources and spending needs. With $300,000 in savings using the 4% rule, you could generate about $12,000 per year. Combined with Social Security benefits, this might be enough for a modest retirement in a low-cost area.
What’s the best way to generate $300,000 in annual retirement income?
The most efficient way is usually combining Social Security with annuities, particularly those with Guaranteed Lifetime Withdrawal Benefits. This approach requires the least amount of savings while providing guaranteed lifetime income.
How does tax treatment differ between income sources?
- Annuity withdrawals (traditional IRA/401k funded): Taxed as ordinary income
- Roth IRA annuity income: Tax-free if rules are met
- Dividend stocks: Qualified dividends taxed at capital gains rates
- Rental income: Taxed as ordinary income but offset by depreciation deductions
- Social Security: Up to 85% may be taxable, depending on your total income
How can I protect my retirement income from inflation?
Consider inflation-protected annuities, investments that historically outpace inflation (like stocks and real estate), and Social Security’s built-in cost-of-living adjustments. Diversifying your income sources can also help manage inflation risk.
Remember, the key to a successful retirement isn’t just reaching a specific number—it’s creating reliable, sustainable income streams that will last throughout your retirement years.
Income Taxes for Retirees With $300k
Taxes are a crucial piece of any retirement strategy. You can only spend what’s left over after taxes, and income tax is a reality for most people.
Fortunately, when you’re retiring with roughly $300k, you might not face a large tax burden. Taxes in the U. S. are generally progressive—the more income you have, the higher the rates. You’re likely to have a relatively low taxable income with about $300k in assets.
Assume the following situation for your retirement:
- You have $300,000 in pre-tax retirement savings. All of that money is potentially subject to taxation.
- You use the 4% rule to (hopefully) make your money last at least 20 years, so you take out $12,000. in your first year of retirement.
- You are married and file your taxes together (we’ll show you a single example below).
- Your family gets $48,000 a year from Social Security, based on the idea that two people get $2,000 a month each.
- Social Security and withdrawals add up to $60,000 in cash flow for the year.
Some of the top questions you should be asking are:
- Are you going to have to pay taxes on your Social Security?
- How much income tax will you pay?
- How much is left over for spending?
- Is that enough to live on?
Will you pay tax on Social Security?
In some cases, Social Security is tax-free. But with a high income, some or most of your benefits might be taxable.
This couple has a “combined income” that’s just a bit higher than the threshold for taxable benefits, and $2,000 of their Social Security will be included in income. Add that $2,000 to the $12,000 of pre-tax IRA distributions for total income (or AGI) of $14,000.
Next, apply the standard or itemized deduction to determine “taxable” income. If you are married and over 65 and file your taxes jointly in 2023, the standard deduction is $29,200. As a result, the deduction completely wipes out the income, leaving them with a tax bill of zero.
Again, this couple owes no federal income tax, and they can spend all $60,000 of the cash flow.
These people may want to take out more money or change assets that aren’t taxed to Roth if they want to plan their taxes better.
For a single person:
- $300,000 in pre-tax retirement savings
- $12,000 of withdrawals in the first year of retirement
- Filing single
- You get $24,000 per year in Social Security benefits
- Withdrawals from Social Security and other sources add up to $36,000 for the year.
In this case, none of your Social Security is taxable. Also, the $12,000 in income is taken away by your standard deduction, so you owe no federal income tax.
As you can see, you’re unlikely to face significant tax issues if you withdraw from your assets at a modest rate. But those with larger balances create bigger withdrawals, which can cause tax problems. Try this tax calculator to look at your own numbers and make some rough estimates.
Of course, if you take large lump-sum withdrawals (to buy a vehicle or fund home renovations, for instance), you might pay more in taxes in some years.
While $300k allows you to dodge some of the highest tax rates (in some years), is it enough to live on? That depends on your situation.
The main drivers include how much you spend and how much retirement income you get. If you have a generous income from pensions or Social Security, $300k might be plenty. But without significant resources, your spending needs to be relatively low.
The amount you’ll spend depends on several factors. For example, costs depend on where you live, what health issues you face, your lifestyle, and more. With low costs, your savings can last longer.
To understand how your income and assets might affect your retirement, try this retirement planning calculator.
How Long Will $300k Last?
It depends on economic conditions and how much you withdraw each year. If you plan to take 4% or less from the portfolio annually, there’s a decent chance the assets could last at least 30 years. That’s roughly $12,000 per year. However, things might go better or worse for you.
Most people spend from their savings in retirement. So, if you have a $300,000 nest egg, how do you make it last for as long as possible? You might want to spend a little bit each month, and you may also want to spend in “chunks” for home repairs, vacations, and other expenses.
Unless you can predict the future, you need to make some guesses: how long you’ll live, how investments and markets will behave, how tax law changes and inflation affect your situation, and more.
While there’s no perfect way to plan for withdrawals, several techniques can help you make decisions.
To make $300k last for your entire life, it’s critical to withdraw at a slow enough rate to prevent running out of money. Pretty obvious, right? But what’s the right rate?
It’s impossible to predict your “safe” withdrawal rate in advance. However, there is plenty of research on how much retirees can withdraw using different strategies. Still, there’s never a guarantee that these strategies will work. A few examples are below.
4% Rule: The so-called “4% Rule” is a research finding—not a rule. Bill Bengen looked at the worst-case scenarios at the time of his study (in the early 1990s). He asked how much a retiree could withdraw from a portfolio with the money lasting for 30 years. In the worst outcome, it was 4% of the portfolio’s starting value. A few notes:
- In many cases, retirees could withdraw more.
- Because of inflation, you have to raise your withdrawal amount every year (you add 4% to your savings when you retire and then raise the amount of money every year).
- The guideline ignores taxation.
- The study assumed that the investor had a portfolio of 20% stocks and 20% bonds.
- You might be able to take out more if you have a more diverse allocation.
For more details, see this article and video on the 4% withdrawal guideline.
Guardrails: Another approach is to use “guardrails” that promote higher spending when things go well and spending cuts when markets crash. To use this strategy, you evaluate your portfolio every year. If the value rises above certain levels, you can give yourself a raise. When the value falls below a certain threshold, you need to cut spending. You might start using guardrails with a 5.4% withdrawal rate and adjust as the future unfolds.
Other strategies: There are endless ways to choose how much to withdraw from your savings each year, but the two above are among the most popular. You could also just withdraw a set percentage without adjusting for inflation, making your $300k last for the rest of your life. But you might not be able to withdraw enough to live on. For instance, if you just withdraw 4% of your account value and recalculate every year (which is different from the 4% rule above, which only looks at your starting balance at retirement), you’ll leave 96% of your balance invested each year. Ultimately, the withdrawal amount available might dwindle to unreasonably small amounts over time.