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.
Combined with Social Security, this would give you $31,000 per year in pre-tax income. This isn't much to live on and it would only last you about 25 years before your portfolio runs out. Starting at age 87, you will need to coast on $16,000 per year in Social Security benefits for the rest of your life.
The best investment for your 400k depends on your financial goals, risk appetite, and time horizon. Mutual funds, individual rental properties, and tax-advantaged accounts like Roth IRAs are popular choices. There are also alternative options like investing in mortgage note funds.
Depending on how you manage your money, you can probably expect an annual income between $48,000 (at roughly $4,000 per month) and $63,000 (at roughly $5,300 per month). More is possible if you invest for more aggressive returns, but that will mean taking on more risk.
How much does a $400,000 annuity pay per month? As of January 2025, with a $400,000 annuity, you'll get an immediate payment of $2,400 monthly starting at age 60, $2,643 monthly at age 65, or $2,850 per month at age 70.
Safe Withdrawal Rate
Using our portfolio of $400,000 and the 4% withdrawal rate, you could withdraw $16,000 annually from your retirement accounts and expect your money to last for at least 30 years. If, say, your Social Security checks are $2,000 monthly, you'd have a combined annual income in retirement of $40,000.
With $400,000, if you buy an annuity at age 62 and then retire, you might expect monthly payments of around $2,400 for the rest of your life. This comes to about $28,800 per year in guaranteed income according to one estimate.
By my calculations, it will take a compound annual growth rate (CAGR) of 12.8% to turn $300,000 into $1 million over the next 10 years.
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.
The point is that if you earned $120,000 per year for the past 35 years, thanks to the annual maximum taxable wage limits, the maximum Social Security benefit you could get at full retirement age is $2,687.
For example, if you have retirement savings of $1 million, the 4% rule says that you can safely withdraw $40,000 per year during the first year — increasing this number for inflation each subsequent year — without running out of money within the next 30 years.
Ideally, you should aim to save three to six months' worth of living expenses in your emergency fund. With $400,000, you could easily set aside a healthy chunk of this amount, providing peace of mind and security. It's never too early to start saving for retirement.
$3,000 X 12 months = $36,000 per year. $36,000 / 6% dividend yield = $600,000. On the other hand, if you're more risk-averse and prefer a portfolio yielding 2%, you'd need to invest $1.8 million to reach the $3,000 per month target: $3,000 X 12 months = $36,000 per year.
The magic number that most Gen Xers feel they need to retire is $1.56 million. This is much higher than the average amount they have saved — $108,600 — and higher than most Americans feel they will need. In short, Gen X retirement is in trouble.
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.
The average retirement account generates an average return of about 5% annually. Some estimates place this number higher, but we'll use conservative math. With a retirement account of $300,000, this means an average return of about $15,000 per year.
By age 40, you should have three times your annual salary already saved. By age 50, you should have six times your salary in an account. By age 60, you should have eight times your salary working for you. By age 67, your total savings total goal is 10 times the amount of your current annual salary.
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.
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.
$400,000 is a big annual household income. You can certainly survive just fine off $400,000 a year. However, based on the above expenses, a $400,000 household income only provides for an upper-middle-class lifestyle for a family of four in a big city.