When is it time to retire?
According to Howie Pentony, owner of Pentony Capital Management in Portersville, knowing when it’s time to retire is simpler than people might think.
He said it will require some math, with the end goal aiming to answer the question of “How much money do I need each month to live and pay for expenses during retirement?”
Pentony, who helps people handle their IRAs, said he has his clients follow the 4% rule, where a person takes the dollar amount you have saved in your IRA, and multiply it by 4% to approximate the amount of income you should take out each year to help live on.
“Lets say you have $200,000 and 4% is $8,000 a year,” Pentony said. “It’s really easy. You have to have a budget worked out. You need to know how much money you need to live every month.”
Those costs include living expenses, utilities, food and travel.
For most people, the money coming from the retirement account is not the only stream of money retirees will rely on.
First, retirees will most likely also have a 401(k) to pull from, which works the same as an IRA, either Roth or traditional.
Retirees also will receive a monthly Social Security check. The average monthly check as of July was $1,782.74, according to the Social Security Administration.
“Everybody’s situation is different,” Pentony said. “If you can figure out how much income you need, you can go from there. You need to know how much you need to live every month during retirement.”
According to the Bureau of Labor Statistics, the average annual income of someone age 65 or older in 2021 was $55,335, and the average expenses were $52,140, or $4,345 per month.
The bureau also said the expenses of younger retirees are greater than those of older retirees — $4,870 for people between the ages of 65 and 74 and $3,813 for those 75 and older.
“My average client is above 70,” Pentony said. “Now some people don’t want to retire. Some people want to continue working.”
Pentony said age has nothing to do with when someone can retire. He has seen clients retire well before that national average age of 65 for men and 63 for women, according to the Census Bureau.
He said the main reason people get behind on retirement planning is simply because they are not good savers.
“There is no secret to it,” Pentony said. “How much money do I need to live every year? When you reach that, people will retire then, but again some people never want to retire.
“I just encourage my clients to work hard, save their money and invest.”
