Believe it or not, data from the 2022 Survey of Consumer Finances indicates that only 9% of American households have managed to save $500,000 or more for their retirement. This means less than one in ten families have achieved this financial goal.
It may be possible to retire at 45 years of age, but it depends on a variety of factors. If you have $500,000 in savings, then according to the 4% rule, you will have access to roughly $20,000 per year for 30 years.
If you have $400,000 in the bank you can retire early at age 62, but it will be tight. The good news is that if you can keep working for just five more years, you are on track for a potentially quite comfortable retirement by full retirement age.
If you use the classic 4% rule to manage your retirement savings, with a $500,000 balance, you're looking at about $20,000 per year in income. But that's probably not your only income source available. Chances are, you're eligible for Social Security at the very least.
Just 16% of retirees say they have more than $1 million saved, including all personal savings and assets, according to the recent CNBC Your Money retirement survey conducted with SurveyMonkey. In fact, among those currently saving for retirement, 57% say the amount they're hoping to save is less than $1 million.
The ideal monthly retirement income for a couple differs for everyone. It depends on your personal preferences, past accomplishments, and retirement plans. Some valuable perspective can be found in the 2022 US Census Bureau's median income for couples 65 and over: $76,490 annually or about $6,374 monthly.
You can retire at 50 with $500,000; however, it will require careful planning and budgeting. As the table above shows, if you have an annual income of either $20,000 or $30,000, you can expect your $500,000 to last for over 30 years. This means you will run out of retirement savings in your 80s.
It is 100% possible to retire with $400,000, provided you're not looking to enjoy a particularly expensive retirement lifestyle or hoping to leave the workforce notably early.
Rounding up for safety, you'd need at least $1.3 million saved to generate $53,000 per year using the 4% rule. That means if you had $500,000 saved, as O'Leary suggested, withdrawing 4% annually for 30 years would only provide a safe spending amount of $20,000 per year.
Probably 1 in every 20 families have a net worth exceeding $3 Million, but most people's net worth is their homes, cars, boats, and only 10% is in savings, so you would typically have to have a net worth of $30 million, which is 1 in every 1000 families.
But there is value, Shamrell said, in studying the habits of 401(k) millionaires, especially if you want to become one. Most 401(k) millionaires are Gen Xers or Boomers. On average, they have been saving for about 26 years and contribute more than 17% of pre-tax income to their retirement accounts.
Rich retirees: In the 90th percentile, with net worth starting at $1.9 million, this group has much more financial freedom and is able to afford luxuries and legacy planning.
With $500k and no debt, you can retire comfortably. The 4% rule permits an annual withdrawal of up to $20,000 from the age of 60 until 85, which covers 25 years, allowing for a comfortable retirement lifestyle without any outstanding debts.
Your net worth is what you own minus what you owe. It's the total value of all your assets—including your house, cars, investments and cash—minus your liabilities (things like credit card debt, student loans, and what you still owe on your mortgage).
If you have $500,000 in a pre-tax IRA and expect $2,000 per month from Social Security, you may have enough money to retire at age 67. A half million dollars is a relatively modest nest egg, but it can still generate a comfortable income depending on your standard of living.
Monthly Income From A $500,000 401(k)
A $500,000 401(k) can generate different amounts of monthly income, depending on withdrawal strategies and market conditions. If following the commonly used 4% rule, it would provide an annual income of $20,000, or approximately $1,667 per month.
Financial experts generally recommend saving anywhere from $1 million to $2 million for retirement. If you consider an average retirement savings of $426,000 for those in the 65 to 74-year-old range, the numbers obviously don't match up.
The average household retirement income in the United States is $27,617, according to an analysis by Wisevoter of data from the U.S. Census Bureau's American Community Survey. However, depending on where you live, your local average may be much higher or lower.
According to data from the Social Security Administration, as of January 2024, the average monthly retirement benefit payment was $1,909.01, which comes to about $22,322 per year.
For example, if you plan to travel frequently in retirement, you may want to aim for 90% to 100% of your pre-retirement income. On the other hand, if you plan to pay off your mortgage before you retire or downsize your living situation, you may be able to live comfortably on less than 80%.
You've probably heard stories about 401(k) millionaires – people who've managed to save $1 million or more in their retirement accounts.
By age 35, aim to save one to one-and-a-half times your current salary for retirement. By age 50, that goal is three-and-a-half to six times your salary. By age 60, your retirement savings goal may be six to 11-times your salary. Ranges increase with age to account for a wide variety of incomes and situations.
The Rarity of $5 Million Retirements
According to data from the Employee Benefit Research Institute, based on the Federal Reserve's Survey of Consumer Finances, a mere 0.1% of retirees have managed to accumulate over $5 million in their retirement accounts.