If you’re a divorced dad in your mid-50s with kids and a healthy 401(k), retirement at 65 isn’t off the table, but it’s not just about your nest egg anymore. It’s about who you still need to support, how long that support might last and what lifestyle you’re aiming for.
Many Gen Xers are now facing similar questions with retirement on the horizon. The good news? With careful planning and a clear-eyed view of future expenses, retirement in about a decade is within reach.
Let’s say you’re aged 55, divorced with two kids and have $810,000 in your 401(k). Here’s what you and others in similar situations need to think through.
In addition to your robust 401(k) account, imagine you’re able to max out contributions. At your age, that means putting away $31,000 a year ($23,500 regular cap plus $7,500 catch-up). Plus any employer-match, if your workplace offers such a program.
Contribution limits tend to rise over time, but for the sake of simplicity let’s assume they stay the same over the next decade, and that you contribute monthly ($2,583.33) with no employer match. Assuming a conservative average annual investment return of 7%, by age 65 your 401(k) should be around $2 million.
That seems like a strong number, but before you celebrate you need to figure out how much income that will translate to in retirement.
Using the 4% rule as a guide — which means withdrawing 4% of your savings in your first year of retirement and adjusting that amount annually for inflation — that would equal $80,000 in year one. Add on top of that Social Security, whether you decide to start collecting at age 62 or 70. Considering, with the right portfolio management, the 4% rule is meant to last 25-30 years, you could be sitting pretty.
Of course, there are other factors to consider.
Here’s where things get complicated because you’re not just planning for yourself.
Are your kids still minors? In college? Are you covering tuition or housing? It may be wise to budget for additional costs now. Even if you’re done with formal support, you may want to help out in different ways. If you’re the primary caregiver, your household costs may stay higher for longer.
DJ Kamal Mustafa
I’m DJ Kamal Mustafa, the founder and Editor-in-Chief of EMEA Tribune, a digital news platform that focuses on critical stories from Europe, the Middle East, Africa, and Pakistan. With a deep passion for investigative journalism, I’ve built a reputation for delivering exclusive, thought-provoking reports that highlight the region’s most pressing issues.
I’ve been a journalist for over 10 years, and I’m currently associated with EMEA Tribune, ARY News, Daily Times, Samaa TV, Minute Mirror, and many other media outlets. Throughout my career, I’ve remained committed to uncovering the truth and providing valuable insights that inform and engage the public.
