How to Live off of a Nest Egg

You can make retirement funds last if you plan well.
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Everybody tells you to save for retirement, but you need to know how you're supposed to live off your savings after you retire. Your best bet is to make a plan based on your lifestyle needs plus a realistic appraisal of how much you'll have to live on. Break it down into a sequence of tasks and you'll have your retirement planning done in no time.

Step 1

Estimate your total nest egg. You can reasonably estimate what your retirement savings will be based on how much you save each year. If you invest the money, figure your average annual growth and add that to your calculations. Use a free online calculator to estimate what you will have at retirement. Enter "retirement calculator" as a search term, and you will find several you can use.

Step 2

Calculate what withdrawing four percent of your nest egg annually will come to each month. That's the amount retirement planners universally recommend that you withdraw during retirement, according to the Business and Money online page from "Time Magazine." At that rate, your retirement funds will last approximately 30 years, as long as you earn some interest or have some growth. Note that four percent is an annual rate, so divide your withdrawal amount by 12 to get your monthly retirement income.

Step 3

Calculate your Social Security benefit. It grows larger the longer you wait to retire. If you can hold off on claiming Social Security benefits until you are age 70, you will get higher benefits. This amounts to thousands of extra dollars over the course of your retirement. If you can't wait that long, choose either age 62 or your full retirement age. You can calculate your full retirement age with the Social Security Administration's Retirement Calculator. You can calculate your benefit based on your retirement age by using the Social Security Administration's Retirement Planner.

Step 4

Plan your retirement lifestyle. When you know how much you'll have each month, figure out where and how you can live. This might mean you will have to move to a region where the cost of living is lower than where you live now. It could also mean going without some luxuries. Set a monthly budget based on your estimated retirement income plus Social Security and make plans to live within that budget.

Step 5

Plan to moonlight at a part-time job if you desire extra money. As of November 2012, you can earn up to $14,160 a year without losing any of your Social Security benefits. This extra money can mean the difference between barely getting by and living comfortably.

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