Are you wondering if you can retire at 60 with 500k? Whether you’re about to be 60 or much younger, asking the question is the first step.
Retirement doesn’t just happen. It’s a numbers game and will take a lot of planning, dedication, and conscious effort from you and your spouse.
While some experts may recommend you save at least $1 or even $2 million before retiring, that doesn’t account for your own goals, lifestyle, and sources of retirement income.
Considering this, you may not need anywhere near that amount to successfully retire at 60. 500k may be enough for your own individual situation.
This article will cover everything you need to know. We’ll discuss whether or not 500k will be enough, things you need to consider, tips to succeed, and much more.
Can I Retire at 60 With 500k?
The simple answer is yes; 500k may be enough for some people to retire at 60. However, that doesn’t mean it will be easy. To make it work, you will most likely need to be extremely frugal and financially disciplined.
Now for the more complex answer. Whether or not you can retire at 60 with 500k will depend on several factors:
- What retirement looks like to you (everyone’s retirement is different)
- The retirement lifestyle you desire (leisure activities, hobbies, entertainment, etc.)
- How much money you will spend per year (housing, food, transportation, health insurance, etc.)
- The investments you currently have (real estate, stocks, etc.)
- Your retirement income (social security, 401k, IRA, etc.)
- Where you plan to retire (cost of living varies significantly from location to location)
- Whether you’re interested in part or full-time retirement (semi-retired life is becoming more and more popular)
The two most important factors are how much money you will spend in retirement per year and how much your investments and retirement income will generate.
For example, will an investment portfolio of $500,000 and your retirement income generate enough money to support the retirement lifestyle you desire?
Some retirees are able to withdraw around $2,000 from their retirement savings per month and still live a comfortable lifestyle. The key is keeping their expenses as low as possible.
How to Retire on 500k
Now that you know it is possible to retire at 60 with 500k; let’s discuss how you can do it successfully.
As previously mentioned, it’s all about adjusting your lifestyle so that the numbers work in your favor.
This involves creating a mock-up retirement budget to determine necessary changes. Your mock-up budget should include everything from your living expenses to your estimated retirement income.
If you’re not sure where to begin, start by reviewing your current spending habits. While reviewing your spending habits, ask yourself questions like:
- How different is my current spending from what it will be when I retire?
- What categories will I be able to significantly cut back in?
- How different is my current income from my estimated retirement income?
Answering these questions will help you determine how much of a lifestyle change you will need to make to successfully retire at 60 with 500k.
Experts typically recommend you withdraw no more than 4% of your retirement account per year to make sure your funds last.
If you have a retirement account of 500k, this would mean withdrawing roughly $20,000 in your first year of retirement. Add that to the average social security check of $1,536.94, and you would have an annual income of roughly $38,443.28.
How would that stack up against your living expenses in your mock-up retirement budget?
With that said, here 6 tips to succeed in retiring with 500k. Some of them involve steps you should take before retiring, while some are tips for after you retire.
1. Budget Wisely
If you plan to retire at 60 with 500k, you will need to live on a very strict budget. Your budget should cover every single one of your expenses. This means not a single expense should go unaccounted for.
To do so, I recommend you use zero-based budgeting (ZBB). ZBB is a budgeting method in which your income minus your expenses always equals zero.
This will force you to give every dollar of income a purpose at the beginning of each month. This way, you won’t spend any of your money mindlessly on things you can’t afford. Instead, every dollar will have a job and a goal.
2. Start Saving as Soon as Possible
Regardless of your age, the sooner you start investing for retirement, the better prepared you will be. In other words, the earlier you start, the longer you will have to capitalize on compound interest.
One way to start is by opening a 401(k) or an individual retirement account (IRA). If you open a 401(k), make sure to check with your employer to see if they will match any contributions in full. If they do, make sure to take advantage of it.
According to Investopedia, the maximum 401(k) contribution is $20,500 in 2022. However, if you’re 50 or older, you’re allowed to make additional catch-up contributions of $6,500, totaling $27,000.
With that said, if you’re able to reach the maximum annual contribution limit of your 401(k), you should open a traditional or Roth IRA to supplement your retirement savings further.
3. Cut Your Living Expenses
Slashing your living expenses is one of the best ways to make your 500k go further during retirement. According to Investopedia, you should be able to cut your living expenses by 20% after retiring and still live comfortably.
Depending on your situation, this difference can be several thousand dollars per year.
There are many ways to cut your living expenses:
- Downsize your house
- Downsize your car
- Make super cheap meals
- Cut back on discretionary spending
- Lower your electric bill
- Buy second-hand clothing
- Avoid supporting others
If you’re able to reduce your living expenses by just a few thousand dollars per year, the numbers work in your favor for retiring at 60 with 500k and fully funding it until you’re in your 90s.
With that said, you should also try to become debt-free beforehand. This will eliminate the unavoidable overhead of making payments on debt. In fact, if you can’t pay off your debt by 60, you may want to wait to retire.
4. Wait to Draw Social Security
The longer you wait to claim social security, the better. Each year you wait, your benefits are increased by approximately 8%. These higher social security payouts will help you have an easier and less financially stressful retirement.
If this means working for a few more years, it may be worth it. The few years of extra growth will make a huge difference.
However, if you’re able to find other ways to supplement the lack of payouts, you may be able to retire at 60 and still wait to draw social security.
For example, maybe your spouse is a bit younger and still willing to work to supplement your retirement income.
5. Choose the Right Location
To successfully retire at 60 with 500k, it’s critical that you choose the right location. Depending on where you currently live, this may mean moving to an area with a lower cost of living to reduce your expenses.
Housing, taxes, food, transportation, and other cost of living expenses vary significantly across the United States and from country to country.
While evaluating the right budget-friendly location to retire, you should also consider:
- Access to health care
- Crime rate
- Climate and weather
- Amenities and recreation
For example, if you live in Seattle, you should consider moving somewhere like Tucson, where the cost of living is much less. You may even want to consider moving overseas.
Moving will also allow you to tap into any savings you’ve accumulated in a home or any other asset you no longer need.
For example, you may no longer need a 4 bedroom house if your kids are older and have moved out.
With that said, if you’re happy with where you currently live, you can always wait to make this move until you have officially retired.
6. Start a Retirement Side Hustle
As previously mentioned, one of the factors you should consider when determining if you can retire at 60 with 500k is whether you’re interested in part-time or full-time retirement.
According to Fidelity, part-time retirement is on the rise, “more workers are transitioning into retirement by first shifting from full-time to part-time work. In 2018, 10% of men and 17% of women ages 55 to 61 were working part-time, while 11% of both men and women between 62 and 79 had part-time jobs.”
While you may not be interested in part-time retirement, it provides major benefits in addition to supplementing your retirement income.
For example, it will have a positive impact on your physical and mental health by keeping you active and socially engaged. In fact, part-time retirement may even add years to your life.
It will also allow you to wait to claim social security, which will most likely increase your lifetime benefits.
If you do choose part-time retirement, use it as an opportunity to make money doing something you enjoy, such as freelancing.
Frequently Asked Questions
Here are a few frequently asked questions about retiring at 60 with 500k:
Can I Retire on 500k Plus Social Security?
All things considered, it is possible to retire on 500k plus social security. According to the Social Security Administration, the average social security check was $1,536.94 in March 2022.
Add that to retirement savings of 500k that follows the 4% rule, and you will have roughly $3,204 per month plus any other retirement income you have.
Note: this is a very rough estimate and should be used as nothing more than an example.
How Many Years Will 500k Last in Retirement?
How many years 500k will last in retirement will depend on how much you spend per year.
For example, if you live in a state with a low cost of living and are frugal, 500k will last you much longer than if you live in an expensive state and live an extravagant lifestyle.
With that said, let’s assume you follow the 4% rule. The 4% rule is a rule of thumb that recommends retirees withdraw no more than 4% from their retirement account the first year they retire and then adjust for inflation every following year.
Considering this, if you have 500k in your retirement account and follow the 4% rule, your 500k will last 30 years if you withdraw roughly $20,000 per year.
How Much Does the Average Person Retire With?
According to a survey conducted by the Transamerica Center for Retirement Studies, Americans in their sixties have an estimated median retirement savings of $172,000.
However, the survey found that the top 39% have more than $250,000 saved.
Note: This is how much they have saved for retirement and not necessarily how much they will retire with.
How Much Does the Average Retired Person Live on Per Month?
According to the U.S. Bureau of Labor Statistics, the average total annual expenditures of older households (age 55 and older) is $49,279. This comes out to roughly $4,107 per month.
For ages 65-74 it’s $48,885 ($4,074 per month) and for ages 75 and older it’s $36,673 ($3,056 per month).
Final Words on Retiring at 60 With 500k
Whether someone retires at 70, 60, 50, or even earlier, it’s possible with nearly any amount of savings, including 500k. However, it won’t be easy, and there’s a lot you will need to consider.
With that said, it’s all about figuring out how it will work for your own individual situation.
Aside from being frugal and saving aggressively, you will need to determine how much retirement income you can count on and what assets you will be able to utilize.
You will also need to consider whether or not you need to downsize your home and lifestyle and possibly move to an area with a lower cost of living. The key to retiring at 60 with 500k is keeping your expenses as low as possible.
To determine if it will work for you, you should start by creating a mock-up retirement budget.