Can you retire on $500k?
Wondering if you can retire on 500k? This guide explores whether $500,000 is enough to retire, how long it will last and at what age you can make it happen.
If you retire at 60 with $500k and withdraw $31,200 annually, your savings will last for 30 years.
Retiring on $500K is possible if an annual withdrawal of $29,400–$34,200 aligns with your lifestyle needs over 25 years.
Retirement plans, annuities and Social Security benefits should all be considered when planning your future finances.
You can retire at 50 with $500k, but it will take a lot of planning and some savvy decision-making.
Can you retire on $500k?
Yes, it is possible to retire comfortably on $500k.
This amount allows for an annual withdrawal of $30,000 and below 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.
However, if you want your retirement savings to cover a 20-year-period, the table below 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:
| Initial savings | Annual Spending | Is $500k enough? | Ending Balance after 20 years |
|---|---|---|---|
| Initial savings | Annual Spending | Is $500k enough? | Ending Balance after 20 years |
| $20,000 | Yes | $612,253 | |
| $30,000 | Yes | $282,098 | |
| $500,000 | $40,000 | No | Savings run out after 18 years |
| $50,000 | No | Savings run out after 13 years |
Based on the calculation in the table, if your expected annual spending exceeds $30,000, $500,000 will not be enough to cover your expenses over 20 years in retirement.
How long will $500k last in retirement?
How long $500k will last in retirement depends 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 20% federal tax rate, $500k can last for 25 years if you spend $34,200 annually. The table below offers a detailed breakdown of how long $500k can last across various annual spending scenarios:
| Spending per year | Spending per month | Years it will last |
|---|---|---|
| Spending per year | Spending per month | Years it will last |
| $29,400 | $2,450 | 35 |
| $31,200 | $2,600 | 30 |
| $34,200 | $2,850 | 25 |
| $38,400 | $3,200 | 20 |
| $45,600 | $3,800 | 15 |
When deciding how long your retirement savings will last, retirement plans, annuities, and Social Security benefits should all be considered alongside the figure you have sitting in savings.
You should also bear in mind that expenses as a retiree tend to be low. However, if you have any financial dependents or outstanding debt, such as your mortgage, this may increase your annual expenses.
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, this becomes even more of a possibility.
In retirement, Social Security benefits can provide an additional $1,900 per month, on average.
You can start receiving Social Security benefits as early as 62. However, these will be reduced. 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.
Can you retire at 50 with $500k?
You can retire at 50 with $500,000; however, it will require careful planning and budgeting.
As the table above shows, if you have an annual income of either $20,000 or $30,000, you can expect your $500,000 to last for over 30 years. This means you will run out of retirement savings in your 80s.
When you retire and how much you will need depends on a number of factors, including:
Your retirement lifestyle – How you plan to spend your retirement will impact the amount of money you need. For example, if you plan on traveling extensively, you will spend your retirement savings more quickly than if you live a more frugal lifestyle.
Your other sources of income – Will you receive additional benefits to boost your total figure, such as gifted support from a family member or Social Security payments? Have you remembered to factor these things in?
Where you plan to live – The cost of living varies depending on where you live. Some states can be more beneficial for retirees, with lower taxes and day-to-day expenses. If you plan on relocating in retirement, it’s wise to factor in any cost differences.
What age can you retire with $500k?
You can retire whenever you choose, as long as you can financially support yourself.
As mentioned, $500,000 can last for over 30 years if budgeted correctly. However, there are a number of caveats to this, including how long you need your retirement savings to last you.
For example, if you retire at 40 and need enough retirement savings for another 40 years, you may struggle.
There are also a number of other age-related factors to consider, including:
Social Security benefits: The earliest age at which you can begin receiving Social Security benefits is 62, but if you delay taking benefits, your monthly payments will increase. Full retirement age (FRA) is between 66 and 67, depending on your birth year.
Medicare eligibility: Medicare eligibility begins at age 65, regardless of retirement status. However, if you choose to retire before age 65, you will need to find alternative healthcare coverage until you become eligible for Medicare.
The following scenarios assume an estimated tax rate of 20% and an annual return of 6%. They are not adjusted for inflation.
Is $500k enough to retire?
Yes, retiring comfortably with $500,000 is achievable. This amount can support an annual withdrawal of up to $34,000, covering a 25-year period from age 60 to 85.
If your lifestyle can be maintained at $30,000 per year or about $2,500 per month, then $500,000 should be sufficient for a secure retirement.
How to retire on $500,000?
If you want to retire and have $500,000 in savings, you will need to embark on some strategic planning and financial management before you take the leap.
Here are some key things to consider:
Budgeting: Outline your projected annual income and your expected expenses. This will show you how far your $500,000 will need to stretch. When outlining your yearly income, you need to work out how much you plan to withdraw from your retirement accounts each year. Many people opt for the 4% rule – withdrawing 4% of your retirement savings annually, adjusted for inflation.
Additional income: If your budget is leaning more red than green, then you’ll need to think of how you’ll support yourself. This could mean a part-time job, some wise investing, or even downsizing to an area with a lower cost of living.
Social Security: If you’re eligible, you won’t be able to claim Social Security until age 62. Even still, this will be at a reduced rate until you reach full retirement age. You need to weigh up your options and decide if short-term financial gain is worth missing out on down the line.
Unexpected expenses: Without a crystal ball, no one can predict the future, so unexpected expenses are likely. You need to ensure you have a safety net to cover you financially.
By developing a robust retirement plan before you say goodbye to the 9-5 will ensure you have enough money to last throughout retirement.
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.
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.
However, if you have an after-tax Roth IRA, you’ll already have paid that tax when the money entered the account and can withdraw it tax-free.
3 ways to increase your retirement 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.
Experts often recommend the following:
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.
Build a varied portfolio of investments and get 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.
Find the right retirement 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.
Learn more: Who are the top financial advisor firms in the US?
Get expert retirement advice
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 the right advisor for you.
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Senior Content Writer
Rachel is a Senior Content Writer at Unbiased, producing content across a range of different sectors, including personal finance, retirement, and investing. She specializes in simplifying intricate financial terms into clear, engaging content tailored for both B2C and B2B audiences.