Can you retire on $500k [Updated April 2024] (2024)

However, if you consider different spending scenarios, check the table below, which illustrates how $500k, with an average annual return of 6% before taxes and a 22% federal tax rate, would perform under different yearly spending situations after a 25-year period:

Initial savingsAnnual SpendingEnough?Ending Balance after 25 yearsRequired Initial Savings
$10,000Yes$745,246$126,154
$20,000Yes$440,001$288,462
$500,000$30,000Yes$134,757$450,770
$40,000No-$170,488$613,077
$50,000No-$475,733$775,385

Based on the calculation in the table, if your expected annual spending exceeds $35,000, $500k might not be enough to cover your expenses over 25 years in retirement.

How long will $500k last in retirement?

$500k can last you for at least 25 years in retirement if your annual spending remains around $20,000, following the 4% rule.

However, it will depend on how old you are when you retire and how much you plan to spend each month as a retiree.

Assuming an average annual return of 6% before taxes and a 22% federal tax rate, the table below offers a detailed breakdown of how long $500k can last across various annual spending scenarios:

Spending Per YearYears It Will LastTotal InterestTotal WithdrawalTotal Taxes
$20,00033$1,035,000$660,000$145,200
$40,00017$510,000$680,000$149,600
$60,00011$330,000$660,000$145,200
$80,0008$240,000$640,000$140,800

Retirement plans, annuities and Social Security benefits should all be considered alongside the figure you have sitting in savings, and you should also bear in mind that expenses as a retiree tend to be low. Especially if any children are now financially solvent adults and large loans, such as your mortgage, have been paid off.

Ready to take charge of your retirement planning? Plan your retirement confidently with our retirement calculator. It provides personalized insights for your financial future.

Can I retire on 500k plus Social Security?

As we have established, retiring on $500k is entirely feasible. With the addition of Social Security benefits, the possibility of retiring with $500k becomes even more possible.

In retirement, Social Security benefits can provide an additional $1,800 per month, on average. This additional income can help you achieve the retirement lifestyle you want.

You can start receiving Social Security benefits as early as 62. However, these will be at a reduced amount. Your full benefits only become available once you reach full retirement age. For those born during or after 1960, this is 67.  

Social Security benefits are also taxable, which is important to consider if you plan to rely on this money to supplement your retirement income. How much tax you pay depends on your overall retirement income and several other factors, including the state you reside in, as some taxes opt not to tax Social Security.

What are the income taxes applicable to retirees with $500k?

When working through your later-life checklist and financially preparing for retirement, you must consider how taxes will factor in. You’ll need to know how much they will reduce your final amount of accessible, usable income. With $500,000 in savings, your bill likely won’t be extortionate – especially if you plan to spread withdrawals across 20 years or more. But ultimately, your tax liability will come down to:

  • Your filing status (single filer, head of household, married filing jointly, etc.)

  • Where you live (different states have different tax rules).

  • Where your retirement income is from (different sources have different tax rules).

  • Your total amount of annual income.

Regarding the impact of your income source, if you have a traditional pre-tax IRA (Individual Retirement Account), your distributions will be levied for tax at the point of withdrawal. Whereas if you have an after-tax Roth IRA, you’ll already have paid that tax when the money entered the account and can withdraw tax-free.

Here’s a quick example: You plan to retire at 65 and hope your retirement savings will see you through 20 years. Distributing $500,000 evenly across these 20 years, you’re looking at monthly payments of $2,083 and an annual income of $25,000. This would place you within the second-lowest federal income tax rate band of 12%.

Can you retire at 50 with $500k?

It’s undoubtedly feasible to enjoy an early retirement at 50 with $500,000, but it won’t necessarily be easy, and it might necessitate some compromise on your part.

Applying the 4% percent rule discussed earlier, you can theoretically withdraw $20,000 per year, or $1,667 per month, for 30 years, taking you up to age 80. This figure may be lowered or increased in value by inflation and market conditions. If you increase your life expectancy to 85 or 90, it will be reduced by those additional years.

Overall, with a moderately frugal lifestyle and expenses totaling less than $20,000 each year, you should be able to leave the workforce earlier than you once anticipated you’d be able to. Even if you can’t do it by age 50, getting close at that point might mean you could make it happen at, say, 55.

Try our retirement calculator

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Three routes to increased savings

You may now want to figure out how to increase your savings, growing that $500,000 to $600,000 or more to give yourself some additional breathing room. Some extra disposable income as a retiree. Our best recommendations are as follows:

  1. Adjust your monthly budget and save where possible – try to avoid regularly spending your money on unnecessary things that matter less to you, in the grand scheme of things, than a happy and comfortable retirement. Set achievable lifestyle and financial goals with proper consideration of your future self. Cut back where you can, and redirect that money where it can be better used.

  2. Build a varied portfolio of investments, seeking expert advice – a solid and stable investment portfolio comprising several types of securities could be very helpful to you, significantly boosting your savings and improving your retirement. If you don’t know where to begin, speak with an expert financial advisor to get started on your journey into investing.

  3. Find the right retirement and pension products – many different savings accounts and products are available that can be helpful to you as a retiree. Annuities, for example, convert your savings into a guaranteed monthly income for a given period. This period could be the rest of your life if you purchase an annuity with a lifetime income rider.

The bottom line

If you’ve managed to save $500k for retirement, this is a viable savings for your post-work life.

This will guarantee you a valuable degree of security and comfort in your later years, and it’s a figure many will never reach

For retirement planning advice and investment guidance, connecting with an experienced financial advisor is highly recommended. They can guide you through the daunting world of retirement planning and lead you to success. Get started with Unbiased and find your perfect match.

Frequently asked questions

Can you retire on $500k [Updated April 2024] (2024)

FAQs

Can you retire on $500k [Updated April 2024]? ›

Yes, it is possible to retire comfortably on $500k. This amount allows for an annual withdrawal of $20,000 from the age of 60 to 85, covering 25 years. If $20,000 a year, or $1,667 a month, meets your lifestyle needs, then $500k is enough for your retirement.

Can you retire with $500 000 and Social Security? ›

The short answer is yes, $500,000 is enough for many retirees. The question is how that will work out for you. With an income source like Social Security, modes spending, and a bit of good luck, this is feasible. And when two people in your household get Social Security or pension income, it's even easier.

How much money should a 70 year old have to retire? ›

How Much Should a 70-Year-Old Have in Savings? Financial experts generally recommend saving anywhere from $1 million to $2 million for retirement. If you consider an average retirement savings of $426,000 for those in the 65 to 74-year-old range, the numbers obviously don't match up.

Can I retire at 67 if I have $500k in an IRA and will receive $2000 monthly from Social Security? ›

Half a million dollars might sound like a lot of money, but if you're approaching retirement, is it enough? If you have $500,000 in a pre-tax IRA and expect $2,000 per month from Social Security, you may have enough money to retire at age 67.

Can I retire with $400 000 and Social Security? ›

Using the standard 4% withdrawal rule, this would let us pull $16,000 per year from the retirement account. Combined with Social Security, this would give you $31,000 per year in pre-tax income. This isn't much to live on and it would only last you about 25 years before your portfolio runs out.

How long can I retire on $500 K plus Social Security? ›

According to the 4% rule, if you retire with $500,000 in assets, you should be able to withdraw $20,000 per year for 30 years or more. Moreover, investing this money in an annuity could provide a guaranteed annual income of $24,688 for those retiring at 55.

When can I retire if I have $500000? ›

It may be possible to retire at 45 years of age, but it depends on a variety of factors. If you have $500,000 in savings, then according to the 4% rule, you will have access to roughly $20,000 per year for 30 years. Retiring early will affect the amount of your Social Security benefit.

How much do most Americans retire with? ›

The average retirement savings for all families is $333,940 according to the 2022 Survey of Consumer Finances. Taken on their own, those numbers aren't incredibly helpful. There are a variety of decent retirement savings benchmarks out there, but how much money other people have isn't one of them.

What is the average 401k balance for a 65 year old? ›

$232,710

What is a good monthly retirement income? ›

Average Monthly Retirement Income

According to data from the BLS, average 2022 incomes after taxes were as follows for older households: 65-74 years: $63,187 per year or $5,266 per month. 75 and older: $47,928 per year or $3,994 per month.

What does the IRS consider full retirement age? ›

The full retirement age is 66 if you were born from 1943 to 1954. The full retirement age increases gradually if you were born from 1955 to 1960 until it reaches 67. For anyone born 1960 or later, full retirement benefits are payable at age 67. The chart on the next page lists the full retirement age by year of birth.

Can you retire at 65 with $500,000? ›

Retiring on $500,000 may be possible, but it probably won't be easy. In addition to aggressive saving and strategic investing, you'll need to be honest about your needs and thoughtful with your spending.

Can you retire at 60 with $300 000? ›

The short answer to this question is, “Yes, provided you are prepared to accept a modest standard of living.” To get an an idea of what a 60-year-old individual with a $300,000 nest egg faces, our list of factors to check includes estimates of their income, before and after starting to receive Social Security, as well ...

Do retired millionaires get Social Security? ›

The amount a person receives in Social Security benefits is not directly affected by their current income or wealth. Therefore, even if someone is a millionaire or billionaire, they can still receive Social Security benefits if they have a qualifying work history.

What is the 4 rule in retirement? ›

The 4% rule says people should withdraw 4% of their retirement funds in the first year after retiring and take that dollar amount, adjusted for inflation, every year after. The rule seeks to establish a steady and safe income stream that will meet a retiree's current and future financial needs.

How much income does $500 000 generate per month? ›

A $500,000 401(k) can generate different amounts of monthly income, depending on withdrawal strategies and market conditions. If following the commonly used 4% rule, it would provide an annual income of $20,000, or approximately $1,667 per month.

Do millionaires get Social Security when they retire? ›

The amount a person receives in Social Security benefits is not directly affected by their current income or wealth. Therefore, even if someone is a millionaire or billionaire, they can still receive Social Security benefits if they have a qualifying work history.

What is the highest Social Security you can get when you retire? ›

The maximum Social Security benefit at full retirement age is $3,822 per month in 2024. It's $4,873 per month in 2024 if retiring at age 70 and $2,710 if retiring at age 62. A person's Social Security benefit amount depends on earnings, full retirement age and when they take benefits.

How much money do most people retire with? ›

Average retirement savings balance by age
Age groupAverage retirement savings balance amount
35-44$141,520
45-54$313,220
55-64$537,560
65-74$609,230
1 more row
Mar 5, 2024

What is the maximum retirement payment by Social Security? ›

Key Takeaways. Qualifying for Social Security requires ten years of work or 40 work credits. The maximum benefit is $3,822 for someone at full retirement age (FRA) in 2024. To earn the maximum, individuals must wait until full retirement age to claim benefits and have been a high earner for 35 years.

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