Yes, it is indeed possible to retire comfortably on $600k. With an annual withdrawal of $40,000 from the age of 60 to 85, covering 25 years, this amount allows for a financially secure retirement.
Say that you plan to retire at 62 with $600,000 saved. You expect to withdraw 4% each year, starting with a $24,000 withdrawal in Year One. Your money earns a 5% annual rate of return while inflation stays at 2.9%. Based on those numbers, $600,000 would be enough to last you 30 years in retirement.
It's recommended that most couples save at least seven to eight times their combined annual income to retire comfortably.
The average American spends $4,345 per month in retirement, according to the Bureau of Labor Statistics. That's $52,141 per year.
Financial planners often recommend replacing about 80% of your pre-retirement income to sustain the same lifestyle after you retire. This means that, if you earn $100,000 per year, you'd aim for at least $80,000 of income (in today's dollars) in retirement.
The average retirement savings for all families is $333,940 according to the 2022 Survey of Consumer Finances. Taken on their own, those numbers aren't incredibly helpful. There are a variety of decent retirement savings benchmarks out there, but how much money other people have isn't one of them.
The median household income for Americans aged 65 and over was $50,290 in 2022, according to the most recent Census Bureau data. That breaks down to an average of $4,190.83 a month. In 2024, the social security benefit will increase by 3.2% — matching the rate of inflation in October.
If you retire with $500k in assets, the 4% rule says that you should be able to withdraw $20,000 per year for a 30-year (or longer) retirement. So, if you retire at 60, the money should ideally last through age 90. If 4% sounds too low to you, remember that you'll take an income that increases with inflation.
If you earned around $50,000 per year before retirement, the odds are good that a $300,000 retirement account and Social Security benefits will allow you to continue enjoying your same lifestyle. By age 55 the median American household has about $120,000 saved for retirement, and about $212,500 in net worth.
Filing for Social Security at age 62 could also end up making sense financially if you're worried you won't end up living a very long life. While you'll shrink your benefits on a monthly basis, by getting to collect that money sooner, you might end up with a higher amount of lifetime benefits.
Following the 4% rule, $600k could provide for at least 25 years in retirement, with an annual spending of around $24,000. However, the actual duration will be influenced by your age at retirement and your monthly spending plans.
Based on median incomes and the 10x rule, most people will need about $740,000 to finance a secure retirement. So in theory, a $750,000 Roth IRA and $1,800 in Social Security benefits will be enough for many individuals to retire.
Here, putting $750,000 into an annuity at the time of retirement can generate $57,000 per year for the rest of your life, which is more than enough to replace even a median income. Although it's important to note that this is just one estimate, your individual results can vary.
Nearly 2 in 5 Retirees Have No Retirement Savings
The survey found that about 37% of retirees say they have no retirement savings, up from 30% in 2022, and only about 12% have at least the recommended $555,000 in savings.
As of December 2023, the average check is $1,767.03, according to the Social Security Administration – but that amount can differ drastically depending on the type of recipient.
How much do people save for retirement? In 2022, about 46% of households reported any savings in retirement accounts. Twenty-six percent had saved more than $100,000, and 9% had more than $500,000. These percentages were only somewhat higher for older people.
According to the 4% rule, if you retire with $500,000 in assets, you should be able to withdraw $20,000 per year for 30 years or more. Moreover, investing this money in an annuity could provide a guaranteed annual income of $24,688 for those retiring at 55.
In many larger cities across America, $4,000 per month in retirement income won't provide the most luxurious lifestyle. But there are plenty of small towns that offer a high quality of life on a relatively low income.
Try AARP's retirement calculator to find out if you're saving enough. The rule of thumb is that to you'll need about 80 percent of your pre-retirement income to maintain your lifestyle in retirement, although that rule requires a pretty flexible thumb.
If the combination of Social Security, pensions and prudent draws from your savings is enough to cover the expenses on your retirement budget, then you're pretty much home free. Let your retirement adventures begin!
Assuming you want to withdraw 4% of your retirement assets each year, to be able to live off of $60,000 a year, you would need to have $1.5 million in retirement savings. This means you would need to put away $3,125 a month for 40 years – assuming, again, that you didn't actually invest it.