A $1 million retirement nest egg isn’t what it used to be. While this is more than 90% of U.S. retirees have amassed, $1 million doesn’t go as far as you might think. That said, we wanted to take a look at what it takes to provide $100,000 income annually during retirement.

The 4% Rule

The 4% rule says that you can safely withdraw 4% of your nest egg annually during retirement and assume that your money will last 30 years.

Like any rule of thumb it is just that: a simple estimating tool. At LNWM, we do extensive cash flow sustainability analysis for all clients, especially those near or in retirement. Barring that, the 4% rule can be a quick “back of the napkin” tool. Let’s see how a couple with a $1 million combined in their 401(k)s and regular IRAs can hit $100,000 (before any taxes are paid).

Regardless of whether you think $100,000 is too little or too much, this is simply an example to illustrate the math involved.

Some ways to close this gap: 

***Investments and savings.
***Income from rental property (or renting out part of the family home).
***Additional pensions (from various jobs or government service).
***Roth IRA withdrawals, which have the added benefit of being tax-free.
***Working part-time.

Here at LNWM, we encourage (as much as possible) diversification in the sources of retirement income. Having taxable, tax-free and tax-deferred accounts to draw from allows you to strategize about how to put off taxes or minimize them.