Retire with $600k: a complete guide
This articles explores how long $600k will last in retirement, the tax implications worth considering, and whether it makes sense to seek professional financial advice.
Can you retire on $600k?
Yes, it is indeed possible to retire comfortably on $600k. With an annual withdrawal of $40,000 from the age of 60 to 85, covering 25 years, this amount allows for a financially secure retirement. If the idea of an annual expenditure of $40,000 aligns with your lifestyle, then $600k is sufficient for your retirement needs.
However, exploring different spending scenarios is prudent. The table below illustrates how $600k, assuming an average annual return of 6% before taxes and a 22% federal tax rate, would perform under various yearly spending situations over a 25-year period:
| Initial Savings | Annual Spending | Enough? | Ending Balance after 25 years | Required Initial Savings |
|---|---|---|---|---|
| $600,000 | $40,000 | Yes | $277,379 | $422,621 |
| $600,000 | $50,000 | Yes | $72,134 | $527,866 |
| $600,000 | $60,000 | No | -$133,111 | $633,111 |
| $600,000 | $70,000 | No | -$338,356 | $738,356 |
| $600,000 | $80,000 | No | -$543,601 | $843,601 |
As the table suggests, while $600k is generally sufficient for a comfortable retirement with annual spending up to $50,000, it may fall short if annual expenses exceed this threshold.
How long will $600k last in retirement?
Following the 4% rule, $600k could provide for at least 25 years in retirement, with an annual spending of around $24,000.
However, the actual duration will be influenced by your age at retirement and your monthly spending plans.
Assuming an average annual return of 6% before taxes and a 22% federal tax rate, the table below offers a comprehensive breakdown of how long $600k can last across different annual spending scenarios:
| Spending Per Year | Years It Will Last | Total Interest | Total Withdrawal | Total Taxes |
|---|---|---|---|---|
| $20,000 | 39 | $1,242,000 | $780,000 | $171,600 |
| $40,000 | 20 | $612,000 | $800,000 | $176,000 |
| $60,000 | 13 | $390,000 | $780,000 | $171,600 |
| $80,000 | 10 | $288,000 | $800,000 | $176,000 |
When planning for retirement, it's crucial to consider other financial elements, including retirement plans, annuities, Social Security benefits, and potential reductions in living expenses. Evaluating these factors alongside your savings figure ensures a robust and personalized retirement plan.
If you’re struggling to work out how much money you’ll need in retirement and how much you’ll need to save, a financial advisor can help. They will work with you to understand your unique needs and create a retirement savings plan to make your money go further. Match with a financial advisor below.
What are the income taxes applicable to retirees with $600k?
When navigating your later-life checklist and strategically planning for retirement, understanding the implications of income taxes is crucial. The consideration of how taxes will impact your accessible and usable income becomes a pivotal aspect of financial preparation. With a retirement savings of $600,000, the tax burden is likely manageable, especially if you opt to spread withdrawals across 20 years or more. Your specific tax liability will hinge on several factors:
Your filing status (single filer, head of household, married filing jointly, etc.)
Your location (different states have varying tax rules)
The sources of your retirement income (various sources have distinct tax rules)
Your total annual income
The nature of your income source significantly influences taxation. If you have a traditional pre-tax IRA, distributions will be subject to tax upon withdrawal. Conversely, if you possess an after-tax Roth IRA, the tax has already been paid upon initial deposit, allowing for tax-free withdrawals. To illustrate, consider a scenario where you plan to retire at 65, intending to sustain yourself for 20 years with $600,000. Distributing this sum evenly over two decades results in monthly payments of $2,500 and an annual income of $30,000. This would position you within the 12% federal income tax rate band.
Can you retire at 50 with $600k?
With $600,000 in savings at age 50, an early retirement becomes even more feasible. Applying the 4% rule, you could withdraw $24,000 per year, or $2,000 per month. As long as you maintain moderately frugal living expenses under $24,000 per year, you should be able to leave your career by 50. Even a few more years of saving and growth could make that goal even more comfortable.
While $600,000 at 50 may not allow for extravagant spending, with discipline and careful planning it can pave the way for a simple yet fulfilling early retirement lifestyle. The added savings provides a buffer for unexpected costs or market fluctuations as well.
Three routes to increased savings
You may now want to figure out how to increase your savings, growing that $600,000 to $700,000 or more to give yourself some additional breathing room. Some extra disposable income as a retiree. Our best recommendations are as follows:
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, 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.
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 $600k 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.
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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.