Regarding retirement planning, most people think you need a million dollars or more to retire comfortably. But what if we told you that you could retire with just $500,000? It may sound too good to be true, but it’s not! This guide will discuss how you can achieve a comfortable retirement lifestyle with just half a million dollars. So, whether you’re just starting your career or nearing retirement age, read for some valuable advice!
- Can I Retire With $500k? Is It Enough Money?
- How Long Will $500,000 Last In Retirement?
- How To Make $500k Last A Lifetime In Retirement, Guaranteed.
- Can I Retire On $500k Plus Social Security?
- How To Retire On $500K, Starting Immediately.
- Living Off The Interest On $500,000
- How Much Income Does $500,000 Generate?
- Why Use Annuities For Retirement?
- Keeping Up With Inflation
- Things To Consider When Retiring
- Next Steps
- Frequently Asked Questions
- Retirement Income Guides
- Request A Quote
Can I Retire With $500k? Is It Enough Money?
Is half a million enough to retire on? The quick answer is “yes”! With some planning, you can retire comfortably with $500k. Remember, however, that your lifestyle will significantly affect how long your savings will last. For example, if you’re content to live modestly and don’t plan on significant life changes (like travel or starting a business), you can make your $500k last much longer.
For help with budgeting, we recommend the following:
How Long Will $500,000 Last In Retirement?
The 4% rule is a guideline often used by financial advisors to help clients plan for retirement. The 4% rule suggests that retirees can safely withdraw the amount equal to 4 percent of their savings during the year they retire and then adjust for inflation each subsequent year for 30 years.
The basic idea is that if you retire with $500,000 in assets, you should be able to withdraw $20,000 per year for 30 years (or longer).
However, this rule has been debunked in recent years, and the appropriate withdrawal rate is roughly 2.8%.
How To Make $500k Last A Lifetime In Retirement, Guaranteed.
The only way to guarantee you don’t run out of money in retirement is to purchase an annuity with a lifetime income rider. This will guarantee that you receive a certain amount of money each month for the rest of your life, no matter how long you live.
For example, if a 55-year-old person purchases a $500,000 annuity with a lifetime income rider and wants to retire in 10 years at age 65, that person would receive roughly $58,680 per year for the rest of their life. If you live for 30 years in retirement, you will receive $1.76 million in payments. When the annuity owner dies, the remaining balance passes down to beneficiaries in a lump sum.
Can I Retire On $500k Plus Social Security?
Yes, you can! The average monthly Social Security Income in 2021 is $1,543 per person. In the tables below, we’ll use an annuity with a lifetime income rider coupled with SSI to give you a better idea of the income you could receive from $500,000 in savings. The data will be based on the following:
- Social Security Benefits will be based on couples at $3,086 total.
- $500,000 annuity with an income rider providing a monthly income for life.
- The starting point will be age 62 since this is the earliest age to collect SSI.
How To Retire On $500K, Starting Immediately.
The table below illustrates how much monthly income can be generated immediately with a combination of annuity payments and Social Security Income (SSI).
ADDITIONAL READING: How Much Does A $500,000 Annuity Pay?
| Age | SSI | Annuity | Total |
|---|---|---|---|
| 62 | $3,086 | $2,646 | $5,732 |
| 65 | $3,086 | $2,804 | $5,890 |
| 70 | $3,086 | $3,063 | $6,149 |
Living Off The Interest On $500,000
Some retirees like to withdraw interest from a fixed-interest savings account like a fixed annuity or CD. For example, the interest on five hundred thousand dollars is $125,461 over seven years with a fixed annuity, guaranteeing 3.25% annually.
Find all the current fixed annuity rates here.
How Much Income Does $500,000 Generate?
For a person planning for the future, the following table will estimate how much guaranteed income a $500,000 annuity will pay out annually for the rest of a person’s life. The “Age” column is the age a person purchases the annuity with income starting now or in the future. Income amounts do not include Social Security.
| Age | Immediately | In 5 Years | In 10 years | In 20 Years |
|---|---|---|---|---|
| 40 | $66,942 | |||
| 45 | $74,027 | |||
| 50 | $54,916 | $81,968 | ||
| 55 | $41,834 | $60,728 | $89,053 | |
| 60 | $30,500 | $46,364 | $67,242 | |
| 65 | $33,650 | $50,753 | $73,054 | |
| 70 | $36,750 | $54,930 | $78,566 | |
| 75 | $38,300 | $57,690 |
Why Use Annuities For Retirement?
Annuities are the only retirement plan in the United States that provides a guaranteed income for a lifetime, even if the plan runs out of money. As a result, the annuity is a money management tool in retirement, taking all the guesswork in budgeting your day-to-day expenses. By utilizing this financial plan, a retiree will never have to worry about running out of money.
Annuity Basics
Understanding Lifetime Income Riders
Keeping Up With Inflation
Some annuities offer a guaranteed lifetime income that can increase regularly to keep up with inflation. Once the income increases, the payment amount is locked in and can never go backward from that point forward.
Things To Consider When Retiring
- Inflation is rising whether you like it or not. So plan accordingly or decrease your lifestyle.
- Per the U.S. Department of Health and Human Services, you have a 70% chance of going into a Nursing Home, Assisted Living Facility, or Home Health Care. So buy long-term care insurance now.
- There is a 100% chance you will die, buy affordable life insurance or at the minimum, burial insurance for funeral expenses.
Next Steps
Although saving for retirement can seem complicated, it is doable with some planning and self-discipline. And if you want to ensure you won’t outlive your savings, consider purchasing an annuity with a lifetime income rider. Contact us today for a quote, and let us help you get started on the road to a comfortable retirement. Thanks for reading!
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Frequently Asked Questions
Can I retire at 55 with $500k?
Yes, you can retire at 55 with five hundred thousand dollars. At age 55, an annuity will provide a guaranteed income of $24,688 annually, starting immediately for the rest of the insured’s lifetime. The income will stay the same and never decrease.
If the annuitant selected the increasing income option, they would receive $21,000 annually initially, with the income amount increasing over time to keep up with inflation.
At age 62, you can start Social Security Benefits. Combining the two sources of income could provide a fixed income stream for the rest of your lifetime.
Either lifetime income option will continue to pay the annuitant even after the annuity has run out of money. At the time of the annuitant’s death, the designated beneficiary will inherit the remainder of the annuity.
Can I retire at 65 with $500K?
Yes, you can retire at 65 with five hundred thousand dollars. At age 55, an annuity will provide a guaranteed income of $30,938 annually, starting immediately for the rest of the insured’s lifetime. The income will stay the same and never decrease.
If the annuitant selected the increasing income option, they would receive $25,000 annually initially, with the income amount increasing over time to keep up with inflation.
Retirement Income Guides
- How Much Money Do I Need To Retire?
- Is $5 Million Enough To Retire?
- How To Retire With $4 Million
- Is $3 Million Enough To Retire?
- Can I Retire With 2 Million Dollars?
- Can I Retire Comfortably With $1.5 Million?
- Is $1 Million Enough To Retire?
*Disclosure: Some of the links in this guide may be affiliate links. I may receive a commission at no cost if you purchase a policy. It helps us keep the lights on!