People who are considering retiring early often ask: can I retire at 60 with $500k? Unfortunately calculating the income you will need isn't the easiest thing to do. You have to look at your entire living expenses list for the year, and that takes some time to work through.
So, is retirement closer than you think? It’s possible. This article will tell you everything you need to know to retire by 60 with $500k.
The TLDR answer (too long, didn't read) is that it is possible to retire with $500k, but you have to know how to make it work for you and your budget.
Can I Retire With $500k at 60?
The average retirement age is 65, but if you have your income projections based on social security benefits sorted out, you might be in the right position to retire with $500k at age 60. With social security, the maximum you can get per year is $34,000.
To be able to get full benefits, you have to wait until you’re 70. Therefore, if you retire at 60 with $500k, you still have 10 years before you can collect your social security retirement pension. Of course, it’s always better to wait to retire, but not everyone wants to wait until 70 to stop working.
If you want to preserve your savings, there are many ways to get part-time income during those 10 years while waiting for your social security benefits. Additionally, it’s a good lifestyle because you’ll stay busy, preserve your cash, and you’ll still be able to step back from work.
How Much Money Should You Have to Retire at 60?
By age 60, it’s likely you will be somewhat ready to retire. The amount you should have saved will depend on your current lifestyle and how you want to continue when you retire.
The ideal scenario is to retire at 60 with the lifestyle you desire. You want to enjoy true financial independence at this age, and that means that you need to know how much the average person needs by then.
The average 60 year old doesn’t have enough money to retire straight away. Ideally, you want to have saved at least eight times your annual income for your retirement. If you earn on average $100,000 per year, you should have eight times this amount by the time you’re 60.
How Many Years Will $500k Last in Retirement?
The average couple in retirement spends around $50,000 per year. This means that the average couple can retire and live for around 10 years being fully supported with $500k.
It’s not a lot of cash, but you can comfortably live with it if you spend moderately and take into account things like investments that will offer you a good return on your cash.
Spending From Your Retirement Assets
When you are ready to retire and enjoy the money that you’ve worked so hard for, you might be ready to turn your savings into your new salary. However, no one can tell you what you should do with your retirement money! That’s totally up to you to figure out. Some people like to travel, others like to enjoy it because they’ve spent years working for that rainy day money and it’s finally a rainy day.
Although, it's important to take note of the 4% rule. This is a simple way to determine what you should spend in your investments. You work it out by totalling up all of your investments and withdrawing 4% of that total in your first year of retirement.
Every year after that, you adjust the dollar amount by accounting for inflation. This means that you won’t outlive your money in your 30-year retirement, according to that rule. For example, if your portfolio is more than $1 million in assets, then you’d withdraw $40,000 to start off within the first year. As the cost of living changes, you add more to your retirement as you continue.
In addition, it's important to note that there are some things that you shouldn't do with your retirement money. These include:
- Making Poor Investments: If there is something that you don't know about, don't invest in it. All it does is ensure that you can’t get the most out of your money and you could lose it all. Read more about investments that won't promise you big returns and actually return like a boomerang and hit you in the fact.
- You’re Betting on Stocks: If you’re spending your retirement money betting on the stock markets, the chances are that you are going to gamble away your retirement money long before you’re able to spend it.
- You’re Not Taking Your Employer's Savings Plan: If you choose not to go for the 401(k) benefits that your employer has given you, then you should expect a little less cash. 401(k) contributions are going to help you to get your retirement savings off the ground and without them, you’re going to find that you have less than you could have wanted.
How to Fix a Retirement Shortfall
If you find there is a shortfall in your retirement money, you need to work out how to fix a retirement shortfall quickly. You can then work on saving better so you don't find yourself in that position again. When it comes to learning how to pay the pension shortfall, you’re going to do so much better when you learn about it as early as possible.
You can also seek some independent financial advice to make sure you are on the right track with your money. You might even choose to sell your home and downsize it into a smaller property that you own. Overall, it’s crucial to be aware of the importance of retirement planning.
However, if you don't want to sell part of your house, you can bring in tenants and rent it out. You can even rent it out as an Airbnb for part of the year.
It’s important to know that some of the best retirement plan options are those that outline your savings from a young age. The younger you start, the more you have later on. Also, consider some passive income ideas.
There are some rules for retirement planning at 35 that you should consider, and these include the fact that you should start early. Above all else, you have to educate yourself. You want to have more than a social security pension when you get to retirement age, and that means figuring out your retirement plan early on.
Once you have done all of your retirement calculations, you can finally answer the question: can I retire at 60 with $500k? You can calculate the money you will need, set priorities, choose the right accounts, and then choose the investments you want to make. This will all matter in your retirement planning efforts.
Can I Retire at 60 With 500k?
As you can see, the answer to that is yes; however, you have to take a conservative approach towards your income until at least your social security benefits kick in. Once that happens, you will be in a more comfortable position to enjoy your retirement properly.
