Annual retirement income is key to retirement planning
When planning for retirement, the amount of income retirement savings can provide each year is more important than the balance.
A $1 million balance in a 401(k) translates into $40,000 of annual income using the 4% rule.
This amount may be sufficient to cover expenses, especially with Social Security checks, but it depends on individual circumstances.
For example, with $30,000 a year in Social Security, the total annual income would be $70,000, while a $90,000 annual expense would require more savings, such as $1 million, to generate $40,000 annually, and an additional $50,000 from other sources, totaling more than $90,000 to meet expenses.