How long will $300 000 last in retirement

Key takeaways

Table of Contents Show
Your lifestyle decisions will affect how long your retirement savings last
The 4% rule of thumb is useful as a starting point to determine how long your retirement savings will last
There are several other factors that can impact how long your money will last
There are strategies you can use to help your retirement savings last longer
While you’re withdrawing a part of your retirement savings, it’s important to keep a healthy portion invested

You’ve spent your working life saving for retirement. Now it’s time to spend some of that money. But how much? After all, you don’t want to outlive your retirement savings.

It’s safe to say we spend a lot more time figuring out how we’re going to save for retirement, than how we’re going to withdraw those savings. Here are some tips that may help.

What your retirement looks like

Before you begin to estimate how long your retirement saving will last, you need to spend some time thinking about what you’ll do in retirement.

Do you plan to travel a lot or be a homebody and spend time with your grandchildren? Do you plan to downsize your home? Or are you planning to work part time in retirement? All these lifestyle decisions will impact how long your retirement savings will last.

Your retirement lifestyle and budget

Once you’ve decided on your retirement lifestyle, you’ll likely want to create a retirement spending plan that reflects your lifestyle choices.

This table shows a sample budget for an average retirement lifestyle1. For a simpler or more elaborate retirement lifestyle, your budget figures would be less or more.

Basic expenses
Shelter (primary home)2	$13,975
Vehicles3	$7,047
Groceries	$6,184
Health and dental	$5,694
Home and garden4	$1,932
Clothing and personal care	$2,951
Phone and communication	$1,903
Personal insurance and financial services	$1,561
Local transportation	$756
SUBTOTAL	$42,003
Additional expenses
Recreation, entertainment, reading5	$1,824
Restaurants, alcohol, tobacco	$3,237
Second home	$1,706
Travel	$7,803
Pets	$0
Charitable and personal gifts	$3,429
Miscellaneous	$1,506
SUBTOTAL	$19,505
TOTAL (excluding tax)	$61,508
Income tax	$11,018
TOTAL (including tax)	$72,526

The above example is for illustrative purposes only. Situations will vary according to specific circumstances.

The 4% rule

In the 1990s, financial planner William Bengen used historical data to determine that, as a rule of thumb, for most people, withdrawing 4% of their retirement nest-egg each year would allow them to enjoy a steady income for 25 to 30 years.

However, there are some things to remember about the 4% rule:

You’ll still have to pay income taxes from this annual amount
You may need to adjust for the annual inflation rate (how much goods and services increase in price each year)
It doesn’t consider investment returns on your remaining retirement savings

For many people, the 4% rule will be more like a guideline. Some years they may withdraw more, some years less, depending on their plans and lifestyle.

Estimating your own retirement income needs

It’s difficult to calculate exactly how long your money will last in retirement. However, you can estimate using these steps:

Add up all your retirement savings including registered retirement savings plans (RRSPs), tax-free savings accounts (TFSAs) and non-registered accounts. Your retirement savings may also include the sale of a business. Divide your savings by the number of years you expect to live in retirement to get an estimated annual income amount from your savings. Remember, this estimate won’t include any potential future investment returns.
Add up all your sources of monthly retirement income from company pension plans, government benefits such as Canada Pension Plan (CPP) or Quebec Pension Plan (QPP), Old Age Security and Guaranteed Income Supplement (GIS). Multiply this amount by 12 to get an annual amount.
Add the 2 annual amounts together from steps 1 and 2 to get your approximate annual retirement income amount.
Next, add up all your annual expenses in retirement. Include mortgage, car or rent payments, health care expenses, food, insurance, utilities, gifts, travel, etc. And be sure to treat yourself occasionally.
Compare your annual retirement income with your annual expenses. If your annual income is higher than your annual expenses, you’re in good shape. If not, you may need to reduce your expenses or consider working longer and saving more.

Remember, this estimate doesn’t consider someone living off dividends or a similar constant income stream.

The importance of investing in retirement

What happens if you live longer than you expected? Or inflation makes things you buy more expensive than you’d planned?

It’s important to have a strategy that lets you withdraw some of your savings while keeping a healthy portion invested.

This chart provides some examples and shows the importance of keeping your retirement savings invested.

Total retirement income	Investment returns	Total annual expenses/ withdrawal	Number of years money will last
$300,000	0%	$15,000	20
$300,000	4%	$15,000	25
$500,000	0%	$35,000	14
$500,000	6%	$35,000	33

The above example is for illustrative purposes only. Situations will vary according to specific circumstances.

Factors that can affect how long your retirement savings will last

The length of your retirement – While the average Canadian retires at age 63.5 according to Stats Canada, some people choose to work longer. If you continue to work until you’re 70, that’s 6.5 fewer years of retirement you need to save for, or more money you can spend annually during retirement.
That said, if you want to retire at age 60 or even 55, you may need to plan for 35 years of retirement or more. That may mean you need to save more for retirement or spend more frugally.
Market volatility – Market ups and downs can affect the return on your investments and your total retirement savings. Working with an advisor is a great way to ensure your investments match your comfort with investment risk.
Inflation – If your rate of return on your investments lags behind the rate of inflation for a long period of time, as your cost of living increases, your current lifestyle will become more difficult to afford and you may have to adjust it.
Your health – As we age, it’s common for health care expenses to increase. Whether you’ve lost your employer healthcare benefits or are looking to get health and dental insurance, it’s important to look at your health and healthcare costs and how you’ll pay for them if they increase. Looking in the future, when you may not be able to look after yourself any longer, you’ll also want to consider long-term care and how you’ll pay for that.

Making your retirement savings last longer

There are several strategies you can use to make your retirement savings last longer:

Delay your retirement – If you think you have a shortfall in your retirement savings, you may decide to work longer, or work part-time, or have a side hustle in retirement that earns you income.
Stick to a budget – Having a budget in retirement helps you make your spending more predictable including planning for healthcare expenses, vacations, etc.
Tax-efficient retirement withdrawal strategies – There are ways you can manage the amount of income tax you pay in retirement.

What’s next?

Now that you know more about how long your money may last in retirement, you may want to contact your advisor to:

Create a retirement spending plan to calculate your expenses
Determine how much retirement income you can expect from the government
Calculate your total retirement savings
Learn about options for drawing an income from your retirement savings that may help you not outlive your money

The information provided is based on current laws, regulations and other rules applicable to Canadian residents. It is accurate to the best of our knowledge as of the date of publication. Rules and their interpretation may change, affecting the accuracy of the information. The information provided is general in nature and should not be relied upon as a substitute for advice in any specific situation. For specific situations, advice should be obtained from the appropriate legal, accounting, tax or other professional advisors.

Can you live off the interest of 300 000?

In most cases $300,000 is simply not enough money on which to retire early. If you retire at age 60, you will have to live on your $15,000 drawdown and nothing more. This is close to the $12,760 poverty line for an individual and translates into a monthly income of about $1,250 per month.

How long would 300k last?

If you have $300,000 and withdraw 4% per year, that number could last you roughly 25 years. That's $12,000, which is not enough to live on its own unless you have additional income like Social Security and own your own place. Luckily, that $300,000 can go up if you invest it.

What percentage of retirees have a million dollars?

In fact, statistically, around 10% of retirees have $1 million or more in savings. The majority of retirees, however, have far less saved. If you're looking to be in the minority but aren't sure how to get started on that savings goal, consider working with a financial advisor.

How much interest will 300 000 earn a year?

Living Off The Interest On $300,000 For example, the interest on three hundred thousand dollars is $10,753.86 annually with a fixed annuity, guaranteeing 3.25% annually.