Want to know how to live off 500k forever, retire early, and enjoy life on your terms? You aren’t alone. Many people are now looking to retire early, but a large percentage don’t want to wait until they’re millionaires… But, is it possible to live off 500k forever, even if you’re not single? Let’s take a look.
Is 500k a lot of money?
$500k seems like a lot of money…but is it really?
That depends on a few factors.
For many people, 500k is a lot of money, especially during retirement. With an additional income source like Social Security or a pension, and keeping spending on the thrifty side, you could theoretically make $500,000 last the rest of your life.
But, if you live in an high cost-of-living area, if you will be living on 500k with a spouse or significant other, or if you plan on spending more money in retirement, 500k may not be enough.
- your own spending habits,
- how you want to retire,
- and where you plan on living.
But for many people, 500k could last a long time! So could you live off 500k forever? Let’s dig explore this and dig into the details!
Can you live off of 500k?
Absolutely, although it will depend on when you retire and your annual spending.
For example, if you spend $50,000 a year, and your money doesn’t earn another cent of interest, you’d be able to live off of your investments for 10 years. If you could lower that to $30,000 a year, with no interest earned, you could up that time to almost 17 years.
What if you add interest to the equation? Then you money will last much longer! (We’ll tackle this in the next section when we figure out how long you can live off 500k.)
And again, we aren’t taking into account any pension, social security, or passive income payments. If you have any of those, your investments can stretch much further.
How long can you live off 500k?
So how long can you live with 500k? And at what age can you retire with 500k?
Let’s say that you have $500,000 saved, and your investments earn an average of 4% annual returns. With that noted, let’s also say that you only need $40,000 a year to live during retirement. If that’s the case, and you aren’t earning any other income from other sources, you could still live on 500k for over 17 years.
Now, let’s add the average Social Security payment of $1,000. With that, you could bump up your retirement another 13 years, meaning you could live off of 500k for 30 years.
Of course, with all of that being said, it may get hard to live on $40,000 a year in the future, so you’d probably want to supplement your income with a pension, passive income, or other sources. Or, you could always live a bit more lean by living in an low cost-of-living area or even a different country.
Can you retire at 60 with 500k? Is that possible?
Based on the numbers above, you could retire at 60 and have retirement savings until you’re 90! Of course, after that, you may need to find other ways to make more money or grow your investments. But 30 years of bliss might be worth that!
What is a good monthly retirement income?
What should you be targeting in retirement? What is considered a “good” monthly retirement income?
As with all things personal finance, this will depend on your personal expenses.
- Do you think you’ll still have a mortgage by that time?
- Do you plan on moving to a place where you can live on less?
- Will you need regular medical attention?
Every single one of these questions (and more) will determine what a good monthly retirement income for you is.
The average retirement income for adults 65 years and older in 2021 was $71,446 yearly. That means that the average retiree had $5,953.83 each month to live on.
Would you be able to live with that? If not, you may want to save more. If so, or if you could live on less, that’s great!
What is the average 401K balance for a 65-year-old?
In 2021, the average 401k balance for a 65-year-old was $255,151. Now, this may seem like a far cry from the $500,000 we’re talking about. But keep in mind that these investments were measured on 401k’s only. So this doesn’t include any passive income or investments made outside of that.
What is the average Social Security check?
In January of 2022, the Social Security Administration announced that the average benefit for a retired worker would be increasing from previous years. As it stands in 2022, the average Social Security check is $1,657.
How much money can 500k generate? And, you’re probably also asking yourself, “Can I live off the interest of $500,000?”
If we’re assuming the average rate of return is 8% (the average over the last 30+ years, and what’s recommended by experts to calculate by), $500,000 would earn $40,000 a year. This will continuously grow as more money is added to your account too.
For example, that first year would earn $40,000 on $500,000. But if you don’t touch any of it, you would then have 540k, which would earn $43,200 in year two.
So theoretically, if you could live on less than $40,000 a year, you’d never touch your $500,000 initial investment and could live on it for the rest of your life.
How much interest will I earn on $500,000 per month?
What does all this equate to per month? How much interest does 500k generate per month?
Again, if you earn 8% on your $500k a year, that’s $40,000 a year. Divide that into 12 months and you get $3,333 a month.
That’s not too bad! You could live on that, especially if you had an additional pension or Social Security checks coming in!
How can I live off 500K?
Now that you know that it’s possible to live on 500k, let’s talk more about the how to live off 500k forever.
Pay Off Debt Before You Retire
First things first, if you want to live off 500k forever, you’ll want to pay off debt — especially high-interest debt — before you retire.
- Well for one, no one wants to be worried about debt payments when they’re supposed to be enjoying their golden years.
- And second, high-interest debt can cause a major hit to your finances, especially if you’re only paying the minimum balances.
By paying off your debt before you retire, that’s one less bill to worry about, and it keeps more money in your pocket. This may or may not include your mortgage (that’s your choice!), but I recommend not having any student loan debt, credit card debt, or any other debt that could cause financial problems later.
When you’re trying to figure out how to live off 500k forever, you’re absolutely going to need a budget.
When you have an annual budget, you can plan out how to keep your money as long as possible, and earn more in interest over time too.
If you don’t budget, you won’t know how much to spend, and you’ll likely spend more than you should…which means you’re going to run out of money (don’t do this!!).
As we noted above, you could easily live off of $40,000 or less each year and not touch your original investment. But as time goes on, and inflation goes up, you may need to be slightly more strict with your budget.
By having an annual budget, you’ll know what all your expenses for the year are, and be able to plan accordingly.
Focus On Passive Income
Another way to stretch your 500k retirement fund is to focus on passive income.
There are many ways to. do this, but some of our favorites include:
- Investing in real estate – either as a landlord or investor
- Investing in stocks that pay dividends
- Running a turn-key business that you don’t have to invest a lot of time into
Of course, there are many other ways to earn passive income — including earning a pension! But the key is to find something that will continue to pay you each month (or regularly) for years to come. That way, you can supplement your investment income, or live solely off of passive income and let your retirement nest egg continue to grow.
One of the easiest ways to make your money stretch in retirement is by retiring in a low cost of living area. This doesn’t have to be overseas either unless you want it to be!
Here are some states that don’t charge income tax and are fairly affordable to live in:
And, here are some cities that have some of the best retirement communities and the lowest cost of living:
- Youngstown, Ohio
- Fort Wayne, Indiana
- Lexington, Kentucky
- Huntsville, Alabama
- Tallahassee, Florida
- Ocala, Florida
- Pensacola, Florida
- Diboll, Texas
- Waco, Texas
If you want to retire overseas or in a country where your money will go farther, give these a try:
- Puerto Plata, Dominican Republic
- Chitre, Panama
- Popoli, Italy
- Da Lat, Vietnam
- Lisbon, Portugal
- Cantabria, Spain
The choices are endless. You could even become a nomad and travel with your retirement funds if you chose to do so!
Continue To Reinvest If Retiring Early
Plan on retiring early? Then you’ll certainly want to pinpoint how to live off 500k forever.
To reach $500,000 before the age of 65, you’ll want to start as early as possible and invest as much as you can each month. If you plan on earning passive income, reinvest the money you get each month. This only grows your money faster, and then you can enjoy it when you retire!
How To Live Off 500k Forever (And Even Retire Early…)
Now you know how to live off 500k forever, and how it can stretch past 10, 20, and even 30 years if you’re careful!
No more thinking you can’t retire, because $500,000 can easily last you in your golden years, and even earlier if you choose it.
What about you? Do you think you’ll retire early on 500k? Why or why not?
AUTHOR Kimberly Studdard
Kim Studdard is a strategy consultant and course launching expert. When she isn't spending time with her daughter and husband, or crying over This Is Us, you'll find her teaching other mompreneurs how to scale their business without scaling their workload.