How Much Do I Need to Retire at 60?
Are you approaching your 60th birthday with a nagging question on your mind – can I retire comfortably at 60 with just $500K in savings?
It’s a common concern for many who have spent decades working hard and saving diligently for the golden years. But, the answer is not straightforward.
There are various factors to consider such as:
- lifestyle choices
- healthcare expenses
- inflation rates
- the sequence of returns
- and longevity.
In this blog post, I will tell you how much guaranteed lifetime income an annuity would pay if you retire at 60 with $500K.
I also provide a few tips and pointers when allocating the fixed-income portion of your retirement portfolio.
Let’s dive in!
Can I Retire at 60 with $500k?
If your salary is $50,000 a year you can retire at 60 with $500K (according to these general Fidelity Guidelines).
Fidelity Investments Retirement Savings Guidelines say to retire you should have 10 times your final salary saved as a general “rule of thumb”.
The table below lists the monthly and annual lifetime income amounts you’d get if you retired at 60 with a $500k annuity.
$500K Annuity Payments at 60 Beginning Immediately
| $500K Payments at 60 | Monthly | Annually |
|---|---|---|
| Immediate Annuity | $2,833 | $33,996 |
| Index Annuity | $2,839 | $34,063 |
The numbers above are for Life with Cash Refund Payout Option. If your cumulative payments at death don’t equal $500K the monthly payments would continue to be paid to your elected beneficiary until the initial $500,000 investment had been paid back in full.
How Much Interest Does $500K Pay?
$500k would pay $2,395.83 in interest per month assuming a 5.75% interest rate (which happens to be the best 5-year fixed annuity rate available today).
Taking systematic withdrawals of interest from a fixed annuity can be a great way to generate monthly income in retirement without dipping into your principal.
This is a popular way to generate fixed-income investment because you don’t touch your principal.
You can calculate the interest payments for any investment of your choice using this compound interest calculator.
Retiring at 60 with $500k & Social Security
The maximum social security benefit for a 62-year-old in 2023 is $2572 per month. If you purchased a $500,000 annuity at 62 you would have a total monthly income of $5,867.
If you have enough financial resources to delay social security and annuity income for just 3 years your monthly income is almost $1,800 more.
| Age | SS Benefit | Annuity | Total Monthly |
|---|---|---|---|
| 62 | $2572 | $3,295 | $5867 |
| 65 | $3,279 | $4,273 | $7,552 |
Get the Most Retirement Income at 60 from $500K
The payments below show how much a $500,000 annuity would pay you at 60 – based on your age at the time you purchase the annuity. The longer you wait to begin your payments after buying an annuity the more your retirement income payments will be.
| Age at Time of Purchase | Annual Income at 60 |
|---|---|
| Age 40 | $66,942 |
| Age 45 | $60,632 |
| Age 50 | $54,916 |
| Age 55 | $41,834 |
| Age 60 | $34,063 |
How Much Money Should You Have Saved at 65?
It depends on desired retirement lifestyle, expected retirement age, life expectancy, and current savings. Consulting with a financial advisor can help set appropriate savings goals.
The U.S. Bureau of Labor Statistics reported that 65-74 year-olds spent an average of $56,435 per year in 2021. Research from the Boston College Center for Retirement showed the average 60 year old couople had $517,085 saved for retirement.
| Retirement Savings at 60 | Avg. | Median |
|---|---|---|
| Women | $273,341.00 | $117,173.00 |
| Men | $221,752.00 | $140,607.00 |
| Couple | $517,085.00 | $289,736.00 |
*NOTE: Median is the number in the middle of all of the answers.
Source: Hou, Wenliang, How Accurate Are Retirees’ Assessments of Their Retirement Risk? (July 2020).
Simple Ideas to Help you Retire Early
So, how can you ensure that you have enough saved to retire at 60? Here are 5 simple strategies that anyone can implement:
- Start saving early: The sooner you begin to save the better. Most retirement savings accounts are tax deductible and grow tax-deferred. Compounding interest can also make a significant difference over time.
- Increase your savings rate: If you’re behind on your retirement savings, consider increasing your savings rate. Even small increases can have a big impact over time. The Secure 2.0 Act just increased the limit on catch-up contributions.
- Invest wisely: Make sure you don’t put your entire retirement nest egg in one basket and select investment vehicles that are appropriate for your risk tolerance. Consider working with a financial advisor to help you make informed investment decisions.
- Delay Social Security: If you can afford to delay taking Social Security until age 70, you can significantly increase your monthly benefit.
- Consider part-time work: If you are not quite ready to fully retire at 60, consider working part-time to supplement your income and ease the transition into retirement.
You may also want to consider the impact of inflation and the potential need to adjust your budget over time. Once you have a plan in place, you can evaluate if $500K is enough to retire at 60.
According to a Stanford University Center for Longevity Report. – if a 65-year-old husband and 65-year-old wife are both healthy there is a 50% chance one of them will live to be 92.
Next Steps:
Retirement Planning Tools and Resources for You to Get Started
States that Don’t Tax Retirement Income
JourneyGuide Retirement Planning Calculator
Compound Interest Calculator
