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

Put in your current details and our retirement calculator will tell you whether you are on track for retirement

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]? ›

With $500,000 in a Roth IRA and $2,000 in combined monthly Social Security and pension payments, you may be able to afford to retire at age 62. However, that will mean living on approximately $44,000 per year.

Can I retire on $500,000 plus 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 long will $500,000 last year in retirement? ›

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.

How much is $500,000 in 401k at 65? ›

Starting with a balance of $500,000, those numbers project that you'll have $1,409,757 in retirement savings by the time you reach age 65. Using the 4% rule, that equates to an annual income of $56,390. But that number doesn't factor in inflation, which makes it hard to compare it to your salary today.

How long will $1 million last in retirement? ›

Around the U.S., a $1 million nest egg can cover an average of 18.9 years worth of living expenses, GoBankingRates found. But where you retire can have a profound impact on how far your money goes, ranging from as a little as 10 years in Hawaii to more than than 20 years in more than a dozen states.

When should 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.

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

The maximum Social Security check

Your maximum benefit if you file at age 62 – the youngest possible age – is $2,710 per month. Your maximum benefit if you file at full retirement age – between 66 and 67 – is $3,822 per month.

How many people have $500,000 in retirement? ›

How much do people save for retirement? In 2022, about 46% of households reported any savings in retirement accounts. Twenty-six percent had saved more than $100,000, and 9% had more than $500,000. These percentages were only somewhat higher for older people.

What is a good monthly retirement income? ›

Many retirees fall far short of that amount, but their savings may be supplemented with other forms of 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 is the average 401k balance for a 65 year old? ›

The data comes from mutual fund giant and retirement plan manager Vanguard. In its 2023 "How America Saves" report, Vanguard says the average balance for its work-based retirement accounts for clients age 65 and up currently stands at $232,710.

What is the 401k limit for 2024? ›

Highlights of changes for 2024. The contribution limit for employees who participate in 401(k), 403(b), and most 457 plans, as well as the federal government's Thrift Savings Plan is increased to $23,000, up from $22,500. The limit on annual contributions to an IRA increased to $7,000, up from $6,500.

At what age is 401k withdrawal tax free? ›

Once you reach 59½, you can take distributions from your 401(k) plan without being subject to the 10% penalty. However, that doesn't mean there are no consequences. All withdrawals from your 401(k), even those taken after age 59½, are subject to ordinary income taxes.

How many Americans have $1000000 in their 401k? ›

The amount of retirement millionaires continues to grow, too: As of March 2024, the number of 401(k) accounts with balances of at least $1 million rose to 885,138, up nearly 12%, from year-end 2023, and nearly 30% year over year. The average account balance for this group was $1,137,409 as of March 2024.

How much do most people retire with? ›

The average retirement savings for all families is $333,940, according to the 2022 Survey of Consumer Finances. The median retirement savings for all families is $87,000.

What is the best state to retire in 2024? ›

Florida has regained its status as the best state for retirees in 2024. That's according to WalletHub's latest "Best and Worst States to Retire" study. In 2023, Virginia took the top spot and knocked Florida down to No. 2.

Can I live off interest on a million dollars? ›

Once you have $1 million in assets, you can look seriously at living entirely off the returns of a portfolio. After all, the S&P 500 alone averages 10% returns per year. Setting aside taxes and down-year investment portfolio management, a $1 million index fund could provide $100,000 annually.

Is $300000 enough to retire on with Social Security? ›

If you earned around $50,000 per year before retirement, the odds are good that a $300,000 retirement account and Social Security benefits will allow you to continue enjoying your same lifestyle. By age 55 the median American household has about $120,000 saved for retirement, and about $212,500 in net worth.

How much interest will $500,000 earn in a year? ›

If you were to place $500,000 in a high-yield savings account with a 2.15% APY and wait one year, you will have earned $10,750 in interest. This rate is likely insufficient to keep up with annual inflation, which means your money will become less valuable at a higher rate than when it's accruing interest.

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

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. Starting at age 87, you will need to coast on $16,000 per year in Social Security benefits for the rest of your life.

Top Articles
Latest Posts
Article information

Author: Lilliana Bartoletti

Last Updated:

Views: 6451

Rating: 4.2 / 5 (53 voted)

Reviews: 84% of readers found this page helpful

Author information

Name: Lilliana Bartoletti

Birthday: 1999-11-18

Address: 58866 Tricia Spurs, North Melvinberg, HI 91346-3774

Phone: +50616620367928

Job: Real-Estate Liaison

Hobby: Graffiti, Astronomy, Handball, Magic, Origami, Fashion, Foreign language learning

Introduction: My name is Lilliana Bartoletti, I am a adventurous, pleasant, shiny, beautiful, handsome, zealous, tasty person who loves writing and wants to share my knowledge and understanding with you.