Not everyone can be a multimillionaire. But, that doesn’t mean you can’t retire and live comfortably. But, how long can you live off 400k? Is it just a few years? Ten years? Longer? Can you retire with 400k? Let’s discuss it and find out together!
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How long can I live off 400k?
What’s realistic here? How long can you live off 400k?
Well, that all depends on you and your lifestyle! Let’s explore the questions you should be asking and walk through a potential scenario.
- What does your current lifestyle cost?
- Do you plan on supporting dependents, even in retirement?
- What is the cost of living in your city?
These questions will help you decide if living off of 400k is realistic for you and how long it will last.
How Long Will 400k Last in Retirement?
If you invested $400k to live off of, your savings would last for 14 years.
- You had no other monthly income.
- Experienced a 7% annual return on your money.
- And inflation was around 3% per year.
—this might be your scenario. But realistically, your monthly expenses, inflation, and income sources might be slightly different.
Want to work out some other scenarios? You can use this handy calculator to see how long you could live off 400k.
What If You Have Less Than 400k?
What if you’re not quite up to $400k? How long could you live on 300k? What about just 200k?
How long can you live off 300k?
Assuming the same scenario as above (earn 7% on your investments and live on $3,000 per month), you could like on 300k for about 10 years.
Again, this is a rough estimate. You could lower your expenses, work part-time (or even full-time if you choose too), or have passive income that stretches this money.
How long can you live off 200k?
What about an even lesser amount? How long could you live on 200k?
As you probably have already guessed, $200,000 would be the hardest to live off of based on the above scenarios.
At $3,000 a month in expenses, your money would only last about 6 years. That’s why it’s important to also secure other income sources, like:
- social security,
- a pension, or
- passive income.
But, even with other sources of income, it may not be feasible to retire on 200k. Especially if you have a lot of expenses and don’t plan to keep working or making money elsewhere.
But…what if you’re ready for retirement? Does that change the picture above? Can you retire at 65 with 400k?
It’s certainly possible to retire at 65 with 400k, but of course, it’ll be important to live within your means. But, let’s talk through it here.
How much money do you need to retire comfortably at age 65?
You can likely retire at 65 with $400k in the bank and live somewhat comfortably. But, it is important to note that experts put the current “magic number” at around $1 million.
That doesn’t mean you can’t live on less than that. It just means that you’ll need to keep a watch on the market and your withdrawals.
Can you retire with 400k and get social security?
Yes. According to the Social Security Administration, you can receive Social Security benefits based on your earnings record if you are age 62 or older, or disabled or blind and have enough work credits.
As of 2021, the average social security check is $1,437.55. However, that amount can differ based on if you’re living off of social security alone, in addition to the $400k you’ve saved, and other factors.
Also, remember that if you’re married and you and your spouse qualify, you could receive even more.
This is a great question. You have a lump sum of $400k plus you have a regular social security check coming in each month. So….can you retire on 400k plus social security?
First off, let’s assume that you can earn 7% on your money and that inflation is 3% per year…
If you want your 400k nest egg to last for 35 years, you could withdraw $1,750 per month. Add your social security check amount to that. Let’s say it’s $1,400.
That’s a total of $3,150 per month. Nearly $38,000 per year.
Could you live on that for the rest of your life? If the answer is ‘yes’, GREAT! You can retire.
If not, then you’d better keep working and keep on building that nest egg.
Can I Retire at 55 with 400k?
So it sounds like you could make it on 400k if you are 65, but what if you’re even younger? You might be asking yourself, “How much do I need to retire at 55?”. Is 400k the right answer? Or should you have more?
Earlier in this post, we discovered that if you withdraw $3,000 a month and earn 7% interest on the money, your 400k nest egg will last for 14 years.
Obviously, if you try to live this way from the age of 55, your money will only last till you’re 69 years old. That’s just not long enough! Chances are that you’ll still be alive, you’ll have no money, and you won’t be very employable since you’re nearly 70. Not a good move.
But…what if you could live on less? Or maybe you’ve got another income source that would enable you to withdraw less and make your money last longer?
How can you retire at 55 with 400k?
Let’s figure out a way to make retirement possible at 55 with just 400k.
Here are my assumptions:
- You’re single
- You can still live comfortably by withdrawing just $2,000 a month
- And, you can start to receive that $1,400/month social security check at age 62
- And finally, a 7% return on your money with a 3% inflation rate
You’ve got two main options for how to retire at 55 with 400k:
- First, you could withdraw $2,000 per month for life and then take the social security check as a nice bonus on top of your $2,000 starting at 62
- Or, you could make your money last longer by cutting back on the $2,000 by say $500 once you start receiving that extra $1,400 a month
Option 1 will give you a bit more money in your pocket once your social security starts to kick in. BUT, your money will still only last for 27 years with this scenario. In other words, it will last until you’re 82. It might be long enough…but it also might not be.
Option 2 means that you’ll have an income of $2,000 a month until you’re 62. Then, it will bump up to $2,900 per month after your social security kicks in. Still not a ton of money, but it will give you more cushion as your get into your older years. The best part though, is that your money will last approximately 40 years with this simple tweak! Money till you’re 95? Now that sounds pretty good!
Of course, with any retirement planning, you’ve got to understand that there are unknown variables. You could get sick with cancer, you could get severely injured, or maybe inflationary costs rise much faster than the usual 3%! You just don’t know. And, if you’re trying to retire on very little, all these variables make it a pretty risky endeavor.
We’ve been talking a lot about retirement in this post. With retirement conversations, you’ll often come across the term “the 4% rule”.
So what is the 4% rule?
In basic terms, you should be able to comfortably live off of 4% of investments in your first year of retirement. Then, you can increase or decrease based on inflation each year.
So, if you have $400,000 in investments, you could withdraw $16,000 that first year. It’s a low number, but that’s what you’re signing up for! If you withdraw more than that, you’re really at risk of running out of money before you die. If you earn nothing on your money and withdraw $16k a year, your money will last just 25 years.
Ideally, if you’re retiring with just 400k, you’ve got avenues of income to go with it.
How Much Can You Earn on 400k?
We just talked about withdrawing 4% of your 400k nest egg, which equates to $16k. So obviously, earning 4% means that you’d earn $16,000 each year. But what about other scenarios? How much will you earn on 400k if your interest is 7% a year? And what does that equate to per month?
How much interest will I earn on $400k per year?
This depends on the market, and how your money is invested. But let’s just assume the standard 7% across the board. If you have $400,000 invested, you’ll earn a whopping $28,000 in interest that first year.
Of course, that number is assumed to grow, as long as you keep most of that in your account. However, market changes, declines, and more may affect that. And of course, you could earn more based on higher rates and how well the market is doing.
Just as a note — if you go this route, you’ll live off of the money that the $400k generates. By doing that, you can keep the principle in the market. By doing this, you’ll have roughly the same amount of principal for years to come.
How much interest will I earn on $400k per month?
Taking that $28,000 and dividing it by 12 would equal about $2,300 a month.
This doesn’t account for dividends and other income sources. This simply means that if you let your money gain interest in the market, within a year, that $400k would earn $28k, or $2,300 a month.
If you’re wondering “What should I do with 400,000 dollars?” I’ve got you covered.
If you plan on retiring, make sure to do these BEFORE you live off of that 400k:
- Pay off all high-interest debt (so you can spend more of that money on YOU, not your bills)
- Figure out where you will live (preferably a lower cost of living area)
- Choose if you want to rent or buy a place long-term (and make sure you can afford it!)
- Have a 6-12 month emergency fund, just in case
- Check into social security and a pension if you have one
- Check on passive income
Also, remember to look into healthcare and long-term care if you will be retiring before Medicare starts (which is at 65 unless you have a qualifying disability).
By checking on these items first, you can make sure that you’ll be in good shape when you finally retire.
That way, you know…
- how much money you’ll have,
- how much income will be coming in (if you qualify for a pension),
- and how much money you’ll be spending.
When it comes to spending your $400k, remember to not spend more than what you’re earning in interest or passive income/other income sources! You want your money to last as long as possible, but you can’t do that if you’re overspending.
This is when talking to a tax professional and even a financial planner would be helpful. They can help you decide the right withdrawal rate for you, and how much that could cost you in taxes each year. From there, you’ll be able to find the perfect budget that works for you, so that $400k can last (hopefully) longer than 14 years!
How Long Can You Live Off 400k – In Summary
As you can see, if all things go wrong, and you don’t have any other plans in place, $400k would last you about 14 years. But, it’s possible to stretch that out much farther, possibly even your entire retirement! It is possible to live off 400k for up to 30 years or more if you can plan out your retirement!
So what about you? Do you plan on living off 400k for the rest of your life? If you do, talk to us in the comment section below!
AUTHOR Kimberly Studdard
Kim Studdard is a project manager for online entrepreneurs and small businesses. When she isn't spending time with her daughter and husband, or reading her growing pile of horror books, you'll find her working on her HR degree and working towards FIRE.