Thinking about retirement soon? Wondering what your target retirement amount should be? If you’re like many that just aren’t going to reach millionaire status, you’re likely asking yourself a question like, “Can I retire on 500k dollars?”
Is it possible? Can you retire on 500k dollars?
I’ve certainly heard of people proclaiming to do this, but how long will 500k last in retirement? Will they actually still have money when they die? Or will they come up short and find out that they should have invested more before putting a halt to their work?
These are great questions.
For some, it’s absolutely possible to live on 500k in retirement. For others, it’s simply not enough.
So what’s the difference? Why might $500k be enough for some, but not for others?
There are two big factors:
- How early you retire
- What your withdrawal amount is each year
If you retire early and you want to live on $100k a year, then I can tell you already…$500,000 isn’t going to cut it.
But, if you retire at age 65 and you only need $35k a year to live on, then you might just get by on $500k in your nest egg.
Want to know if you can retire on 500k dollars?
What is the Interest on 500k Dollars Annually?
What will $500,000 earn you in interest each year?
Well…that all depends on what you choose to invest in.
Based on my research and my personal experience, below are the expected interest rates for the respective investments.
- Savings: 0.5%
- Certificate of Deposit: 0.65%
- Short term government bond: 1%
- Short term corporate bond: 2-3%
- Annuity: 3%
- Real Estate: 7%
- S&P 500 Index Fund: 10%
If you’ve never managed real estate before, then that’s probably not where you want to stash all your cash. Instead, you’ll likely want to focus on the S&P 500 Index fund, annuities, and perhaps some bond investments.
What if you invested 100% of your nest egg into just one of the above options ? At each of the percentage returns, this is how much you’d earn with your $500,000.
- 0.5% Savings Account: $2,500 per year
- 0.65% CD: $3,250 a year
- 1% Short term government bond: $5,000 a year
- 3% Annuity: $15,000 a year
- 7% Real Estate: $35,000 a year
- 10% S&P 500 Index Fund: $50,000 a year
Quite a big difference from a “high yield” savings account to investing in the stock market, right?
The savings account is less risky, but you certainly can’t live on $2,500 a year. So, as I stated earlier, you’ll likely need to invest in something that yields more, especially if you want your money to last for a few decades!
How Much Interest Does 500k Dollars Earn Per Month?
Wondering how much money you could earn per month with $500k?
Let’s stick with the same investments and percentages as we outlined above, but just with the monthly income on $500,000 this time.
- 0.5% Savings Account: $208 per month
- 0.65% CD: $271 a month
- 1% Short term government bond: $417 a month
- 3% Annuity: $1,250 a month
- 7% Real Estate: $2,917 a month
- 10% S&P 500 Index Fund: $4,167 a month
Sooo…if you were thinking about just putting your money in a CD in your retirement, you might want to think again! $271 a month? I don’t know of too many people that can live on that!!
How Long Will $500k Last in Retirement?
Here’s what you really came to find out. If you have $500k in your nest egg, how long will it actually last you?
Here’s a few scenarios, calculated with Bankrate’s handy savings withdrawal calculator. Take a look and see which one works best for you!
$40k Withdrawal Rate Per Year
- At 8% interest, your money lasts 39 years
- 6% interest, your money lasts 21 years
- 4% interest, your money lasts 16 years
- 2% interest, your money lasts 14 years
$50k Withdrawal Rate Per Year
- At 8% interest, your money lasts 18 years
- 6% interest, your money lasts 14 years
- 4% interest, your money lasts 12 years
- 2% interest, your money lasts 10 years
It’s fairly simple to make $500,000 last for 10 years in retirement. It’s a little tougher to make it last 20 years. And, it’s nearly impossible to live off 500k for 40+ years in retirement.
The withdraw amounts in the above example sound easy enough – living on $40k or $50k might seem pretty doable. Well…today it is….but probably not 20 years from now. And certainly not 40 years from now!
The big factor here…inflation.
The buying power of your dollar goes down every year — by roughly 3.5% a year according to World Data.
What does inflation mean for you?
With inflation rising at 3.5% per year, this means that roughly every 20 years, the cost of consumer goods double. Meaning, your money goes half as far.
Put even more simply, $40,000 today will feel more like $20,000 in just 20 years. …And 20 years after that? It will feel like just $10,000!
This is why really old people still pay you with quarters and dimes. Back when they were kids, this was a lot of money!!
If you’re planning to retire on 500k dollars, be sure to consider the cost of inflation!
Can You Retire on $500k at Your Age?
You might be ready to retire tomorrow, or maybe you’re thinking about retiring in 10-15 years and making $500k your retirement savings goal.
Whatever the case, is it possible to retire on 500k dollars?
Take have a look at some retirement scenarios below!
Can I Retire at 65 with 500k?
You’re getting older, you don’t like your job, you just want to bag it all and do what you want! Is it possible at this point? Can you retire at 65 with 500k?
Let’s assume you can retire on just $40,000 a year and that you can earn 6% on your money in retirement.
How long will 500k dollars last if you retire at age 65?
By living on $40k a year and earning 6% on your money, your retirement fund will last for 21 years – until you’re 86 years old.
That’s okay, but plenty of people live to be older than 86 years old. If you live longer than that, you’re going to have to live on Medicaid…and I imagine that’s no picnic.
But, if your family has a history of only living to 72 years old, then your money will last (bad for your longevity, but good for your bank account!).
One more thing – if you do make it into your 80s, your $40k per year will feel more like $20k a year thanks to inflation.
What Is The Average 401k Balance For a 65 Year Old?
You’re asking about retiring at 65 with $500k in your 401k, and we’ve discovered that that can be enough, but how are you doing compared to the average? How much do most 65 year-olds have saved in their retirement?
According to Investopedia, the average 65 year old has $182k in their retirement accounts. So if you’ve got $500k, you’re well above the average!
Want to retire at 62 years old? You know already that $500k probably isn’t going to cut it if you want to withdraw $40k a year (this will only last till you’re 83 years old).
But what if you can live on just $35k a year? How long will your money last?
With $500k and a rate of return of 6% on your money, your retirement savings will last…
So you’ll be able to last till you’re 91 years old! Not too shabby!
$35k isn’t a ton of money, but if you can do this consistently in your retirement and you really want to stop working, then I’d say this is doable.
Again…remember about inflation though. That $35k is going to feel like $17k in just 20 years. That’s not much!
Can I Retire at 55 with 500k?
Alright, now we’re getting into the more difficult calculations. Is it possible to retire at 55 with $500k?…
First of all, you’ll need to fund your own medical insurance since you’re under the age of 62, so factor that into your calculations.
Second, you already know (based on the above example) that $500k will last for 29 years. If you plan to live longer than 84 years old, then $500k just isn’t going to cut it.
What if though, you could live on just $30k a year? Then could you retire at 55 years old with $500k in retirement?
If you earned 6% on your money, your $500k would last 57 years! You’d be 112 years old! Whoa!
So, while it would be quite difficult to live on just $30k a year (especially in your older years when that feels more like $10k), it technically is possible to retire at 55 years old!
And actually, you may be able to retire even earlier! You could retire at 50 years old, 45 years old, and maybe even 40 years old! ….Especially if you have another source of retirement in your later years…like social security!
Related: Early Retirement – Is It Possible??
Many of you are probably asking if you can retire on 500k along with your Social Security payment each month. It’s a valid question.
First off, if you’re in your 30s like me, don’t plan on any benefit from Social Security. It likely will never go away completely, but the benefits will reduce over time…so much so that I’m just not planning on getting any of it in retirement. If I do get some sort of payout, bonus. 😉
If you’re 55 years old or older, then you’ll likely get something when you retire (at 62 or older). It may even start out as a full payment, but then degrade down to 75% or 50% of that payment in your final years as the program continues to fail.
What’s the Average Social Security Check?
The average person received $1,553 a month from Social Security, or roughly $18,600 a year. Since the program is struggling, let’s just assume that you’ll get $15,000.
If you get $15k from Social Security each year, that means you could reduce your withdrawal by that amount.
Can You Retire with 500k at 65 Plus Social Security
Let’s go back to the examples above.
With $500k, we discovered that if you withdrew $40k a year, your money would last for 21 years.
But, what if we add that $15k of Social Security? Now we only need to withdraw $25k a year! How long will our $500k last then?
Believe it or not…your money will last FOREVER!! It will continue to grow and be worth $2M+ by the time you die in your 90s. 🙂
What if you bumped up your withdrawal to $35k (which means you’d live on $50k a year with the Social Security checks)?
Your money would last until you’re 94 years old! Nice!!
Can You Retire with 500k at 62 Plus Social Security
What if you retire at age 62 with 500k? How long would your money last when you factor in Social Security?
If you withdraw $35k a year (which, again, means that you’ll be able to live on $50k a year with the Social Security payments), then your retirement will last until you’re 91 years old. Pretty decent!
If you reduce your withdrawal to $30k, your money will last over 50 years!
So, if you keep your withdrawal within that zone (between $30k and $35k), you’ll likely still have money when you die. This means you can retire! Yay!! 🙂
It’s certainly not a lavish retirement, but it’s possible.
All of my figures and references so far have been centered in the United States. But…what if you retire in another country? Would your $500,000 stretch further? Could you retire on 500k in another country? And, maybe you could retire much more lavishly!
If you could retire in another country for less money, what are the best countries to retire to?
According to CNBC, there are 10 countries where you can retire on less than $2,500 a month!
- Costa Rica
Costa Rica grades out as the best place to retire because…
- you can get by on just $2,000 a month for a couple,
- medical costs are low,
- there’s available (and affordable) real estate,
- and the temperature is tropical!
Sounds pretty good to me!
How Long Will Your $500k Last in Another Country?
If you can live on $2,000 a month in retirement, how long would your $500k last?
Even if you only earned 4% on your money for your entire retirement, your nest egg would still last for 42 years!
Moving to another country for your retirement? It’s certainly something to consider!
If your goal is to save up 500k dollars in retirement, how do you do it? How can you save up 500k in retirement?
For me personally, I would invest in a few index funds that have proven to return between 8% and 12% for the past 20+ years of their existence.
If you could earn 8% on your money, how much would you need to stash away each month to reach $500k in 40 years? 20 years? 10 years?
How to Save Up 500k Dollars in 40 Years
Want to save up $500k in 40 years?
All you need to do is stash away $144 a month and earn 8% interest on those contributions!
How to Save Up 500k Dollars in 20 Years
Want to save up $500k in 20 years?
You’ll have to put substantially more away each month…
Instead of saving $144 a month, you’ll need to sock away $855 a month to get to $500k in 20 years.
It’s going to be quite a bit tougher, but still doable!
Save Up 500k Dollars in 10 Years
Do you have just 10 years before you’d like to retire?
How much do you have to save each month to get $500k into your retirement?
What if you could earn 12% instead of 8%?
Dave Ramsey keeps preaching that you could earn 12% in the stock market via mutual funds. If you could pull this off, you could get by with investing less each month.
Instead of $2,735 a month, you’d need to save $2,175.
Still a hefty amount, but perhaps more doable!
Is 500k Enough to Retire On? What Do You Think?
You came into this post asking yourself the question, “Can I retire with 500k?”
If you’re retiring very soon and can live frugally, then yes, you can probably retire with $500k.
And, if you intend to live in another country in your retirement to survive on much less per month, then this option will likely work for you as well.
Outside of that, living on 500k dollars is pretty tough, especially if you’re trying to make it last for more than 30 years.
Inflation is just such a monster to battle for that long! Thankfully, you may get some reprieve if Social Security is still paying out the average $1,500 payment each month. If it’s not, you’re going to be pinching pennies for a long time.
Long story short, if you can only muster up $500k for your retirement account, you can probably make it work. But, if you can bump this number up, it is certainly recommended!
How about you? Are you targeting $500k for your retirement? Is it the right number for you?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.