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How to Retire With a 6-Figure Income

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Saving for retirement is an abstract exercise until you put real numbers into a real plan. Let's construct a strategy for a $100,000 retirement income starting at age 65 and running until age 90. You may live longer or retire sooner, but for the purposes of simply starting somewhere in the planning process we'll begin with that.

A comprehensive retirement scenario should consider inflation, market variances, withdrawal rates, and the like -- details best left to financial planners using advanced calculations. Some advisors use what is called a "Monte Carlo" simulation. Others love a good spreadsheet. We're working with what is little more than a cocktail napkin, but the numbers will give you an idea of the work that needs to be done.

If you're 20
We'll assume you've already taken care of the three major roadblocks that keep some millennials from starting the race to retirement: credit card and student loan debt and a three- to six-month emergency fund. You will want to put your retirement savings in a tax-advantaged investment account, such as an IRA, 401(k) or SIMPLE. How to invest your savings is a topic for another time. What we want is a number -- the big number required to fuel our life after work for some 25 years.

Steve Vernon is a consulting research scholar for the financial security division of the Stanford Center on Longevity. His book Money for Life discusses the pros and cons of various ways to generate retirement income. NerdWallet asked him what sort of a nest egg it would take to generate an annual retirement income of $100,000.

"My very general rule of thumb is to have savings equal to 25 times your desired amount of annual retirement income when you retire," he says. "So if you need $100,000 per year in retirement income, you'll need $2.5 million in savings. If the $100,000 income is in addition to Social Security or includes Social Security, that makes a difference."

We'll exclude Social Security in our plan, so the $2.5 million will be our initial starting point.

Zeroing in on the big number
To nail down the savings required for our six-figure retirement income, let's consider another fount of advice. BlackRock, the asset-management company, offers a "Corrections During Critical Pre-Retirement Phase," or CoRI, calculator meant to show the amount an investor must save to generate a desired income throughout retirement.

Using the same parameters given to Vernon, the CoRI calculator gives a similar, if slightly lower, result: $2 million. That would require savings of about $9,500 per year from age 20, based on a projected annual return of 6%. That's a doable number if you have a 401(k) at work; in fact, it's well below the $17,500 maximum deferral allowed in 2014.

But it is about $800 every month. That's a big number to someone in his or her 20s.

If you're 40
In your peak earning years, it may take every bit of that 401(k) deferral limit to get you on track for a six-figure retirement. If from age 20 you'd saved $9,500 per year with a 6% return, you would already have some $350,000 in your retirement kitty. If not, it's time to play catch-up, deploying every investment tool in your arsenal: annual rebalancing, tax-efficient mutual funds or exchange-traded funds, and profit/loss tax harvesting. After age 50 you can use catch-up provisions to boost your contributions to your IRA or 401(k).

If you're 60
It's the race to the finish line, and you should be seeing a big balance on your investment statement. Somewhere in the neighborhood of $1.5 million. To reach our savings goal, a nest egg capable of generating 100 grand in retirement income each year, you may be selling off some assets to pad your account balance.

Reducing expenses during the five-year countdown to retirement can also help you cushion your after-work budget. Now is a good time to factor in your Social Security and Medicare benefits, too. You may even decide to continue working for a few more years, or generate a part-time income to make up for the gap.

The savings target of $2 million to $2.5 million required to generate a six-figure retirement income might seem impossible to achieve -- but only until you have a plan in place and a firm commitment to succeed.


Read/Post Comments (31) | Recommend This Article (46)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 26, 2014, at 2:40 PM, NotAFool99999 wrote:

    I always like to figure this stuff in today's dollars. So would think the goal for a 20 year old to generate $100,000 in today's dollars would be significantly higher that $2.5M. That's more my goal at 56 today.

  • Report this Comment On January 26, 2014, at 2:40 PM, jfchicago wrote:

    Is this $100,000 income plan based on an individual or a couple?

    Does everything increase two-fold if the article is written from the perspective of an individual?

  • Report this Comment On January 26, 2014, at 2:55 PM, kcbeancounter wrote:

    jfchicago, the answer to your question is this for an individual or couple is YES. They are speaking of a six figure income. That means single, plural, whatever the answer is the same a six figure income. Do you want to replace two six figure incomes, then yes you need to double everything they mentioned.\

    No, everything does not increase two fold is written from perspective of an individual.

    Hope this helps.

  • Report this Comment On January 26, 2014, at 3:18 PM, Oregonboy wrote:

    The only people that get a pension these days are Government employees. When will the American people put a stop to this? You do know that our kids education are suffering at the hands of all these government retirees baby boomers that drive new cars and retire at age 55. Must be nice. The elite..the entitled The..Government.

  • Report this Comment On January 26, 2014, at 3:34 PM, cluckgochicken wrote:


    There are private sector companies that offer pensions, and pensions are not evil, neither are governments or government employees. The reason that govt employees have pensions is that they (the unions) negotiated the pensions in lieu of higher pay. I am a govt employee still working at the age of 62, and I make < $17.00 an hour. My pension will pay me about $900.00 a month when I retire at 67. Livin the life of Riley.

  • Report this Comment On January 26, 2014, at 3:48 PM, frank64 wrote:

    oregonboy...should police officers and firefighters receive a pension or do they fall under your evil, greedy, government employee umbrella?

    How about the military?

    How about the people who work at the veteran's hospital?

  • Report this Comment On January 26, 2014, at 3:57 PM, 56GrayMule wrote:

    With zero Margin in the stock market and a government that's printed $300 for every $1 pre-2008 - The chickens are coming home to roost so I'd say this article is worthless than my 300 % of fiat money.

  • Report this Comment On January 26, 2014, at 4:07 PM, Drjoco wrote:

    No offense MF, but what good is a 100,000 retirement income if the USD is worth 25 cents in today's dollars?? By the time a 20 something retires average inflation will half that number every 22 yrs. so it is certainly possible by 2060 that a retiree may need more like 4 to 5 million nest egg to produce an income comparable to 100,000 annually today.

    Good Luck!!!

  • Report this Comment On January 26, 2014, at 4:18 PM, mrclean67 wrote:

    I can't help but laugh when I read all the comments from the Whiney Crybabies who complain about government employees getting a pension and retiring at a young age! You too had a choice to get a government job but probably weren't quailified; jealousy sucks! I ran simultaneous careers as a police officer and being a soldier in the National Guard. I retired two years ago from the Guard after 26 years military service and will be retiring this year from the PD with an $80K pension at the age of 46. Life's good.

  • Report this Comment On January 26, 2014, at 4:38 PM, bearlnr wrote:

    Well, mrclean67, all that you are telling us is that you are one of the problem people. Never did anything to pay into the system, just getting the easy money that the productive people paid in to the system with their taxes. If I were you I would not be so proud of myself for being a leach on society just like all the lazy and undeserving government workers. Actually I would be ashamed of myself, and no no envy here, I have done the right thing with my hard earned money and will have a great retirement ahead of me.

  • Report this Comment On January 26, 2014, at 5:01 PM, agsb2 wrote:

    have a 7 figure job or else a 6 figure income is illegal unless you're Obama's buddy

  • Report this Comment On January 26, 2014, at 5:12 PM, pns123 wrote:

    There are still plenty good pensions out there. Look at just about any gov't job or the military. Some companies, unions and utilities also still offer pensions. And retiree medical, too.

    There are also some good non-pension retirement programs out there,too.

    So before taking a job, if you can, consider the long term wealth building benefits. It makes a big difference later in life.

  • Report this Comment On January 26, 2014, at 6:11 PM, 201k wrote:

    If you need 2.5 to retire, you might as well make it 5million. After the irs takes their share you'll only have half of that. People should know by now that 401k 's are garbage. There's a reason why its a goverment qualified program. In reality, who's retirement are you saving for? Yours or theirs? Put the and the word irs together and it spells THEIRS!!

  • Report this Comment On January 26, 2014, at 7:04 PM, rojodo wrote:

    Does this mean that you consume all the funds at age 90? or will 2.5 Million generate a sustainable 100K income?

    Besides our investments/savings/rental inclome we are also maxing out our Roth401K so any/all growth on this will be tax free at retirement.

    Considering that income from this considerable part of our nest egg would be tax free, then maybe our total nest egg number could be effectively less?

  • Report this Comment On January 26, 2014, at 8:46 PM, yrkidding wrote:

    Two things:

    1) Your 401K retirement savings is not an INCOME. An INCOME is always preferrable to a chunk of taxable money that can and will be sapped away the minute you need medical/long-term care. They'll take the house too.

    2) A pension plan is something that an employee PAYS INTO. My gov't employeed spouse pays more into his pension per month than the average person pays into their 401K and he is required to do this in order to collect on a pension after the required number of years worked.

  • Report this Comment On January 26, 2014, at 10:33 PM, LL1000 wrote:

    I did hat, plus some, in a 14 year period building up a student rental portfolio. Inflation protected, better tax advantages and no drawdown required (assets will actually increase in value). After 23 years of IRA/ 401 ( no matching), I wised up. More work , but less risk and a much better plan

  • Report this Comment On January 26, 2014, at 10:38 PM, spraythegoalie wrote:

    It's frightening to think someone could be underqualified for a government job. Walk into any government office and tell me that these are the cream of the crop. The reality is that they couldn't compete in the private sector. They get the pensions they do because those who award the pensions are the beneficiaries of the pension system as well and, of course, they're spending someone else's money.

  • Report this Comment On January 27, 2014, at 1:28 AM, wink71 wrote:

    No pension? No problem! Start buying houses fix em up Rent em out! Retire early as you want to work for no one but yourself! Get as many as 10 rent houses and you could be looking at 6000 to 8000 a month in passive income. Oh and when they are paid off oh my goodness you are on easy street! Yeah problems arise but going to a 8-5 is the biggest problem ever!!

  • Report this Comment On January 27, 2014, at 9:26 AM, cejays wrote:

    I retired at age 55 6 years ago. My advice to people is to have little or no outstanding debt. My house and 2 cars are paid for. I have no credit card debt. I invested wisely and have a portfolio worth 1.8 million. I take 60K a year as income. What younger people don't understand is, my portfolio is invested in 20% stocks and bonds, and the rest in slow secured IRA's and Money market accounts. I am taking around 4% a year. By the end of the next year my 60K is back in my account due to a slow steady 3-5% interest rate on the slow growing IRA and MM.

  • Report this Comment On January 27, 2014, at 12:39 PM, LarryK wrote:

    Yea, start with a 7 figure retirement account!

  • Report this Comment On January 27, 2014, at 12:47 PM, Sunnyafternoon wrote:

    So this $2.5M just stays under the mattress once its accumulated? You never invest it? You just withdraw $100K per year for 25 years? Sounds like nonsense. Here’s what I actually do for $100K income with far less. First my wife I retired at 65. Our combined SSA comes in at $3K per month or $36K per year. Now my investments need to earn the remaining $64K. I have $1.7M saved. I have $500K of this in very save instruments that earn about 1.5%. This “Safe money” is in essence my cash I use to withdraw when needed for monthly bills. The remaining $1.2M is in various Vanguard Mutual Funds. All I need is the $1.2M to earn on average about 5.5% over any 10 year period, to ensure that the $1.2M stays relatively the same over my lifetime. This year it earned 28%, so I take out the $336K I earned this year and after I pay the 18% taxes due, it left me with $275K to move over to my “Safe bucket” which is now over $700K. Of course it is unlikely that I’ll earn 28% this year, Enough to withstand even a 7 year market collapse!! But even if I lose money over the next few years, all I need is to average 5.5% return which is historically low. This is what my father did, and he died with over $6M in the bank, and that included the 1930 and 2007 crashes. and he started at 65 with less saved...

  • Report this Comment On January 27, 2014, at 10:18 PM, dardson wrote:

    I read early on in my life that most wealthy people who didn't inherit it all made it with real estate. We started in our early 30's buying rental property and have continued until now (in our mid 60's). We have 7 rental properties that all eventually got paid for by the tenants and lately sold a commercial property (I bought during the 35+ years I was a small business owner) and realized enough to buy 4 more rental properties (all are a combination of single family homes and duplexes). Once we purchase those we'll have a gross rental income of $150k. Of course you have to subtract taxes, insurance, and upkeep but we should realize $100k a year with built in inflation protection that real estate usually provides. We have other assess as we have always been good savers + lucky. But the point of the article is how to have 6 figure income and I can tell you it doesn't take that much real estate to generate 6 figures. We never spent a penny of the rental income and plowed it back into our real estate business. We both worked all those years and looked at the real estate as retirement savings which one should never touch. It wasn't that hard if you can keep your hands off the money and let it grow. We just lived off the money we made and treated the rental income as untouchable. Not rocket science. . .just some vision and self control.

  • Report this Comment On January 31, 2014, at 3:58 PM, cmalek wrote:


    If qualifying for a government job is so easy, how come you could not qualify and are working in the private sector???

    To all the other posters that are ragging on government employees, you are right. All governement employees, including politicians, should be working for minimum wage with no benefits and no retirement whatsoever. Just think how much money that would save! Better yet, they should be working for only $1 a year. After all, the honor and priviledge of working for the government should be its own reward.

  • Report this Comment On January 31, 2014, at 10:01 PM, 1664really wrote:

    All credibility is lost in the first paragraph. If a 20 year old is not working without graduating from college, s/he is in college, probably as a sophomore or junior, and still incurring school debt. Many will continue their educations and incur substantially more debt.

    Focusing on retirement before the first job is rather unrealistic, as is having no debt and 6 months living expenses at age 20, let alone 30.

    If that is what it takes to retire with a 6 figure income, virtually no one will. I did not read further. No credibility whatsoever.

  • Report this Comment On February 20, 2014, at 11:29 PM, TerryFixEmUp wrote:

    My wife and I started up a part-time business in 2001 buying fixer upper houses and converting them into rental properties. It was tough sledding to start with, working our regular jobs and doing our fixer upper house business on weekends and evenings. Our motto was - "We worked like dogs, we ate like hogs, and we slept like logs."

    But in the long term it paid off. Four years ago, I retired from my 9-5 job and now devote full time to managing our properties and writing.

    My first book described my experiences in the fixer-upper business, entitled "Fix em Up Rent em Out."

  • Report this Comment On February 21, 2014, at 10:37 PM, retired60 wrote:

    My wife and I retired in our 50's .. I at 53 and she at 58 yrs. old. Both had jobs right out of college. I had a civil service job and she a teacher. Both are 63 yrs. old now. Total income in retirement is $115,000 annually.

    Both children had athletic scholarships for college, and are working after their first year out of college. Both of them are still working w advanced degrees after 8 and 13 yrs. on their jobs.

    We are Blessed and give back and attend church with attention those less fortunate.

  • Report this Comment On February 21, 2014, at 10:47 PM, retired60 wrote:

    just commented on my families retirement and being Blessed to have great kids. Both wife and I don't worry about the stock markets .. everything is fixed annuities, and with my job .. healthcare benefits were included to cover my wife as well. I know some dog Gov. pensions, but if it weren't for them, the private sectors would not have competed to keep them at bay... offering better benefits to keep the Unions out. Now that most Unions are depleted in numbers .. the Private sector is cutting back on those Private Sector benefits. So continue to hate the Unions and Gov. pensions ... and see what we get. What we have now ... middleclass disappearing.

  • Report this Comment On February 21, 2014, at 10:53 PM, retired60 wrote:

    Counting Blessings every day ... My kids have jobs ... Son works for the Feds. 13 plus yrs., and Daughter works in the Education system. 8 plus yrs. w work towards a Doctorate Degree. Good Citizens, that care about others needs.

  • Report this Comment On July 09, 2014, at 1:22 PM, NoNonsenseLL wrote:

    Rental property has been my ticket to a 6-figure retirement. I have written about much of my success on my blog at

  • Report this Comment On July 17, 2015, at 5:25 AM, courtneygraley wrote:

    Use this tool to make your retirement plan. View your <a href=""... savings</a> balance and your withdrawals for each year until the end of your retirement. Social security is determined on a sliding scale based on your income.

  • Report this Comment On July 17, 2015, at 5:54 AM, RetiredFoolCt wrote:

    I agree with @Notafool999999. The retirement planning process HAS to include calculating the sum of all future expenditures expressed in current dollars using a discount model based upon appropriate values of interest rates (the 10-yr Treasury note for example) and inflation (long term average is 4%; medical is 7%). If the present value is less than the available savings/investments accumulated than you are on track for a secure retirement. If not, you are not and have to save more (or cut future spending). A good book on this subject is "7 Equations for a Secure Retirement" by Milevsky.

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