How Much Do You Need to Retire on $10K a Month?

If your goal is to spend $10,000 a month in retirement, how much do you really need saved? The answer isn’t as simple—or as overwhelming—as it might seem.

In this episode, I break down the key factors that influence your retirement number beyond the common 4% rule. We’ll explore how Social Security can significantly reduce what you need to save, why account types like Roth vs. traditional IRAs make a major difference, and how your withdrawal strategy and retirement age can shift the numbers by hundreds of thousands of dollars. Using real planning software, I walk through examples that show how all these variables come together.

Whether you plan to spend $5K or $15K a month, these principles apply. It’s not about hitting a one-size-fits-all number—it’s about understanding what works for your unique plan. 

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Advisory services are offered through Root Financial Partners, LLC, an SEC registered investment adviser. This content is intended for informational and educational purposes only and should not be considered personalized investment, tax, or legal advice. We do not provide tax preparation or legal services. Always consult with your CPA or attorney regarding your specific situation.

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The Retirement Planning Academy is an educational program offered by Root Financial Partners, LLC. Access to the Academy is provided through a one-time payment and does not establish an advisory relationship. The content is for general informational and educational purposes only and does not include personalized financial, investment, tax, or legal advice. Participation in the Academy does not make you a client of Root Financial Partners, LLC. Please consult a qualified professional for advice specific to your situation.

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Episode Transcript

Speaker 1 (00:00):
What would it take to spend $10,000 per month, every
month, for the rest of yourretirement?
Today, I'll show you exactlyhow to calculate this number, as
well as the three factors thathave the biggest impact on this
and can either make or breakyour ability to maintain the
retirement lifestyle you want tomaintain.
I'm a financial advisor and thefounder of Root Financial,
where we've helped hundreds ofclients answer questions just
like this, and what I want to doin today's video is share the

(00:21):
framework I like to use to comeup with a number that can allow
you to determine what you needto spend, what you want to spend
throughout your retirement.
So, to start, I'm going to giveyou a very basic example, maybe
a painfully obvious example,but we're going to use this as
the baseline to say how do westart with something and then
apply the three factors I'mgoing to walk you through to
understand how this numberchanges, so that you can have an
idea of what number is going tomake most sense for you.
So that you can have an idea ofwhat number is going to make

(00:42):
most sense for you.
But let's start with this youwant to spend $10,000 per month
for the rest of your retirement.
That $10,000 per month is aftertaxes.
So let's make an assumption andlet's say that you actually
need to take out $12,000 permonth from your accounts.
Obviously, this is going todepend upon what types of
account are you drawing from.
But let's make the assumptionthat you need $12,000 per month
before taxes so that after tax,you can spend $10,000 per month.

(01:04):
Well, $12,000 per month, that's$144,000 per year that you need
to have in pre-tax income sothat, after taxes, you can spend
$120,000 per year or $10,000per month.
So let's now take this further.
If you need $144,000 per year,you may be familiar with
something called the 4% rule.
The 4% rule states that,historically speaking, you can

(01:24):
take 4% per year from yourportfolio and have that last for
30 years and have a high degreeof confidence that your money
is going to last.
So if we take 144,000 anddivide it by 4%, that gives us
$3.6 million.
So this is a very simplestarting point and that's not
the actual number that you'regoing to need.
But this is the number thatsays if you had $3.6 million and

(01:45):
you could take 4% per year,that would give you $144,000
pre-tax, $120,000 per year aftertax or $10,000 per month.
Now that number is going toadjust for inflation.
The 4% rule assumes you'readjusting that number for
inflation.
But that's not where thisanalysis ends.
That's, in fact, a very basicstarting point, and now let's
discuss the three factors thatare going to change this.

(02:07):
But here's what I actually wantto do.
I actually want to walk throughsoftware that shows you how
these numbers will impact this.
So here's that 3.6 million thatwe talked about.
We're assuming that this sampleclient this is not a real
client, this is just forillustrative purposes only is
retiring at 65.
And this client is also 65today and wants to spend $10,000
per month after taxes.
We are assuming, for a simplestarting point, that there is $0

(02:30):
coming in from social securityhere.
Why are we doing that?
Because if your portfolio isrequired to generate the
entirety of that, that's goingto be very different than if
social security was contributingto some of this $10,000 per
month.
So if you didn't have socialsecurity, what this is showing
is that there's a fairly highlikelihood that if you have that
$3.6 million in your portfolio,you're gonna have a high degree

(02:50):
of success, a high probabilityof success that you can spend
that $10,000 per month for therest of your life.
In this case we're assuming 30years.
But this is such a basic examplethat actually doesn't do us
much good, because the realityis almost all of us are going to
have some other type of anincome source.
The majority of us are going tohave social security.
So if we go back in here andsay, what does this actually

(03:11):
look like if it's not $0 insocial security?
But what if we just assume$2,500 per month in social
security benefits, how wouldthat change things?
Well, if we plug in that numberhere, if you recall, the
probability of success numberthat we looked at was 75% in the
first scenario.
I'm not saying that's thenumber that we should be
targeting, or even that's thenumber that any of you should be

(03:31):
targeting, but I'm trying toset a benchmark that can we get
something between 70 and 75% toshow how this analysis changes
if different factors come intoplay.
Well, if we add social securityto the mix and we go back to
that number, that number isgoing to be significantly higher
.
You'll see that all of a sudden, the probability of success is
much higher because now SocialSecurity is generating some of
these income needs.

(03:51):
Now, if you wanted to normalizethis to have more of an apples
to apples comparison to say well, how much could the portfolio
now decrease by?
In other words, how much lessof a portfolio would the same
individual need to have goinginto retirement to be able to
still generate 10,000 per monthand still have the same
probability of success?
We're going to come in here andwe're going to make the change
to show that 3.6 doesn't need tobe 3.6 to maintain that same

(04:14):
probability of success.
If we changed Roger's IRAbalance to 2.8 million here,
what we'll see is that is goingto have similar outcome as he
would have had not exactly thesame, but similar outcome as he
would have had with $3.6 millionin $0 in social security
throughout retirement.
Obviously simple, maybepainfully simple, but I

(04:34):
illustrate this to show thatyour ability to meet your income
needs throughout retirement.
If you're asking how much of aportfolio do you need, of course
the biggest driver of that, thebiggest factor in that, is how
much other income sources do youhave?
This could be social security,this could be a pension, this
could be an annuity, this couldbe rental income, this could be
any type of income that you havecoming in that is not directly

(04:55):
drawing from your portfolio.
So another way to think of thisis at the high end, what Roger
would need, or what anybodywould need under these
assumptions, is $3.6 million.
That 3.6, if we take 4% peryear out adjust for taxes that
could maintain a $10,000 permonth income for call it 30
years and have a highprobability of success of doing
so.

(05:15):
As more income sources come in,there's less of a portfolio
that's needed, which means that3.6 million is a ceiling on how
much you might need to need.
What we want to explore iswhat's the minimum you might
need here, and that's what thesethree factors are going to help
us to do.
But the first factor is otherincome sources.
The more income from othersources, the less you will need
in your portfolio to maintainthat same standard of living.

(05:38):
Now let's go back to Roger'sprofile here and his net worth.
The next biggest factor, thenext factor that we're going to
look at here that's going toimpact this, is what type of an
account do you have your assetsin?
If you pull money from an IRAversus a brokerage account,
versus a Roth IRA, you're goingto have completely different tax
consequences for doing so.
So as of now, we're showingthat Roger needs $2.8 million in

(05:59):
his portfolio to supplementSocial Security, to maintain
that $10,000 per month for therest of his life.
We are assuming that this is ona traditional IRA.
What if we use an extremeopposite example?
What if this isn't atraditional IRA?
What if it is a Roth IRA?
Well, if we did that, and againif we're trying to keep the
probability of success withinthe 70% to 75% range to

(06:21):
normalize what outcome we'resolving for, I could drop this
down from $2.8 to 2.1 million,and what we're going to see here
is we're going to see a prettysimilar probability of success.
So you can see that right here.
His probability of success isnow 70%.
So at first he needed 3.6million to get somewhere near
this to be able to create thatoutcome, that desired outcome.

(06:42):
Now we're all the way down to2.1 million.
What we've changed is we'veintroduced social security and
we've switched his IRA balanceto a Roth IRA balance.
Now, to be clear here, I'm notjust saying that he did a
conversion.
This is not a tax episode.
What I'm saying is I'm justillustrating the difference
between how much would he haveneeded if all of his money was
in pre-tax accounts, compared tohow much would he need if all

(07:03):
of his money were in tax-freeaccounts?
How much would he need if allof his money were in tax-free
accounts?
That's the only thing that Iwant to illustrate here is
that's a big difference.
That was a $700,000 swing for apretty similar outcome in terms
of how much does Roger needgoing into retirement to be able
to maintain this?
Now, as you can probably see, aswe're going through this,
there's going to be a lot ofvariables are going to be unique
to you.
Some of those variables have todo with what are your actual

(07:24):
goals.
When Some of those variableshave to do with what are your
actual goals, when do you retire?
How much do you want to spendSome of your income sources?
Maybe it's not just socialsecurity.
Maybe there's a pension,annuity distributions,
inheritance, et cetera.
Maybe there's other types ofexpenses, maybe there's other
goals that you have.
So if you actually want to runthese numbers for yourself,
click on the Retirement PlanningAcademy in the link below.
You can actually get access tothe same software and run this

(07:48):
very specific to you.
But what we've done so far isjust illustrating the principles
that we started with 3.6million for Roger and we've been
able to reduce that as we'veintroduced other income sources
and as we've introduced thealternative of not having all
money in a traditional IRA.
But what if some or, in thiscase, all was actually in a Roth
IRA?
So those are the first twofactors that are going to impact
this.
Number one, what other incomesources do you have?
And, number two, what type ofan account are your assets held

(08:10):
in?
The third thing that's going toimpact this is what withdrawal
rate are you using?
Now, here's the reality.
You can't just choose awithdrawal rate and assume that
it's going to work for you.
If you start taking out 10% peryear from your portfolio,
starting at age 65, and youexpect that to last until 95,
you have a very low probabilityof actually accomplishing that.
Sure, there may be some caseswhere that would have worked,

(08:31):
but the overwhelming majority ofthe time, you are going to run
out of money.
So it's not as simple as justchoosing a withdrawal rate that
you would like to choose.
It comes down to two factors.
What you want to choose iswhat's the highest you could
potentially take from yourportfolio while minimizing the
risk of you actually running outof money before you run out of
life.
The withdrawal rate that you canchoose is largely going to come
down to two factors Number one,how are you invested, and

(08:55):
number two, your life expectancy.
So let's go through each ofthose.
Number one, how are youinvested.
This is obvious If you have allof your money in cash.
Let's assume you're Roger andyou need that $2.1 million.
Well, if all of that was justin cash, growing at nothing,
versus another scenario whereRoger has that same $2.1 million
and it's growing it may be amoderate portfolio that's given
him growth over time then itstands to reason that each of

(09:17):
those portfolios are not goingto generate the same level of
income.
They're not going to have thesame sustainable withdrawal rate
.
All the way through Roger'sretirement.
The portfolio is just in cash.
You're not going to be able totake out as much.
So if it's too conservative,you're going to limit your
withdrawal rate.
On the flip side, if it'soverly aggressive or too
aggressive, you're also going tolimit your withdrawal rate.

(09:38):
There's typically a sweet spotbased on how much you need from
your portfolio, other incomesources and other details that
you need to come to determinewhat's the withdrawal rate that
works for you.
So that's number one.
The second piece is your age.
Why your age?
Well, let's use an extremeexample.
If Roger had this $2.1 millionand he was retiring at age 35,
that's very different than Rogerhaving that same $2.1 million

(10:01):
and retiring at the age of 75.
In one of these instances, thatmoney needs to last a whole lot
longer than the other.
We can actually illustrate thathere for Roger.
So what if Roger wasn't 65?
What if, instead, roger today,we are just magically making him
75?
All else is still the same.
He still has that $2.1 millionin his portfolio that we last
ended with.

(10:21):
If we now go back to hisretirement and his probability
of success, it's not going to bethat 70% probability of success
that jumped 25% Significantlyhigher probability of success.
Why?
Well, because his money onlyneeds to last for 20 years now
instead of the 30 that weoriginally projected.
The older you get and reallythis isn't a matter of how old
you are, it's a matter of howmuch life do you have left,

(10:43):
whether you're 60 and you'reonly going to live until 65, or
you're 90 and only going to lastuntil 95, both of those, in
many cases, are the exact samefrom a planning perspective.
They're the same in that weknow how long does your
portfolio actually need to lastfor you?
Of course, there's othervariables surviving spouse,
other factors, how much you'respending but to a large extent,
that's the important factor thatwe're looking at how long does

(11:04):
this money need to last?
Well, if we're trying tonormalize this at 75% 70 to 75%,
normalize that probability ofsuccess at the 70 to 75% range
what we'll see it's not the 2.1million that Roger would have
needed if he were 65 with allthese goals, the $2.1 million
that Roger would have needed ifhe were 65 with all these goals.
If we change this number andknock off $500,000 of that, he's

(11:24):
now 75, remember instead of 65.
If we knock off $500,000 fromhis portfolio, what we're going
to see is that Roger'sprobability of success is still
in that range.
So these are the factors thatwill actually determine how much
do you need in your portfolioto spend that $10,000 per month.
Now, does it actually matterwhether you want to spend

(11:44):
$10,000 per month or $15,000 permonth or $5,000 per month?
No, it doesn't.
These principles are the same.
It's these three factors thatwill largely determine how large
your portfolio needs to be foryou to be able to do that.
So, once again, take a look atthe software.
If you want to run the numbersfor yourself, you can get access
to the Retirement PlanningAcademy below.
But to summarize the thingsthat are going to influence this
is number one how much do youhave in non-portfolio income

(12:05):
sources?
Number two where are yourportfolio assets actually held?
Iras, cash brokerage accounts,roth IRAs?
That's going to make a bigdifference.
And then, finally, number threewhat withdrawal rate can you
actually use For someone thathas a 30-year retirement or a

(12:25):
30-year projected retirement?
Generally speaking, if you'reretiring at 60 to 65 and you
want to plan until 90 or 95,somewhere between 4% to 5.5%,
depending on how you're invested, tends to be a common place to
start, but that will beinfluenced by how are you
invested and how long actuallydo you have with your life
expectancy.
So, for your planning, know howmuch you want to spend and then
work backwards to understandhow.
These three factors will helpyou determine how much you
actually need in your portfolioto create that.

(12:47):
Once again, I'm James Canole,founder of Root Financial, and
if you're interested in seeinghow we help our clients at Root
Financial get the most out oflife with their money, be sure
to visit us atwwwrootfinancialpartnerscom.