How to retire on $500k: a complete guide
Discover if $500k is enough to live on in retirement. If you want to speak directly to a financial advisor, answer a few questions below, and we can connect you to one.
Summary
If you withdraw $20,000 from the age of 60, $500k will last for over 30 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.
Speaking to a financial advisor is the right move to ensure your retirement savings align with your goals.
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 22% federal tax rate, the table below offers a detailed breakdown of how long $500k can last across various annual spending scenarios:
| Spending per year | Years it will last | Total interest | Total withdrawal | Total taxes |
|---|---|---|---|---|
| Spending per year | Years it will last | Total interest | Total withdrawal | Total taxes |
| $20,000* | Over 30 | $1,054,272 | $600,000 | $231,941 |
| $30,000* | Over 30 | $600,531 | $900,000 | $132,118 |
| $40,000 | 18 | $323,665 | $720,000 | $71,208 |
| $50,000 | 13 | $224,651 | $650,000 | $49,421 |
| $60,000 | 10 | $172,319 | $600,000 | $37,910 |
*The amounts for total interest, withdrawals, and taxes are for 30 years.
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.
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.
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?
The US has no specific retirement age that is mandated by law.
This means you can effectively 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.
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.
Is $500k enough to retire?
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. She has nearly a decade of experience writing and producing content across a range of different sectors.