When it comes to retirement planning, there are a lot of factors to consider. How much money do you need to retire? What will your monthly expenses be in retirement? How long will you live? These are all important questions that you need to answer if you want to have a successful retirement. In this guide, we will explore the question of whether or not you can retire at 62 with $400,000 saved in your 401k. We will also offer some retirement planning advice for those who are looking to retire as soon as possible!
- How to Retire on $400,000 Comfortably
- What Is The Average Rate Of Return On A 401(k)?
- Social Security
- How to Retire at Age 62 on $400k
- Why Use Annuities?
- Keeping Up With Inflation
- Can I Retire At 62 with $400,000 in a 401(k)?
- Things To Consider When Retiring
- Find Out If $400k Will Be Enough For You To Retire
- Retirement Income Guides
How to Retire on $400,000 Comfortably
Can I Retire at 62 with $400,000 in a 401k? This guide will show you how to retire on $400,000, step-by-step. We’ll provide estimates on your retirement income at different age brackets.
If you are close to transitioning to retirement, check our Retirement Planning Guide.
If you are not close to transitioning to retirement, check out our Guaranteed Retirement Income Guide.
Use an annuity calculator to get a better idea of the retirement income generated.
This guide will answer the following questions:
- Can I retire at 62?
- How much do I need to retire at 62?
- Should I buy an annuity with my 401k?
- How long will $400k last in retirement?
What Is The Average Rate Of Return On A 401(k)?
It depends on what you invest your money in. The rate of return on your 401(k) plan is related to how well the investments do. Your 401(k) plan is different from other people’s plans, but the money you save in it can make returns of 3% to 8%. This happens when you divide your money between stocks, bonds, and cash investments.
The average monthly Social Security Income check 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 provide you a better idea of the monthly income you could receive off a $400,000 in savings. The data will be based on:
- Social Security Benefits will be based on couples at $3,086 total.
- $400,000 annuity with an income rider providing a monthly income for life.
- The target retirement start date will be age 62 since this is the earliest age to collect SSI.
How to Retire at Age 62 on $400k
The table below illustrates how much monthly income can be generated immediately with a combination of annuity payments and Social Security Income (SSI).
Why Use Annuities?
Currently, 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. The annuity is basically 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, ever.
Understanding Lifetime Income Riders
Keeping Up With Inflation
Some annuities offer a guaranteed lifetime income with the ability to increase your income 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.
A 40-year-old purchases a $1,000,000 annuity with a lifetime income rider to retire at age 60. At age 60, the lifetime income amount may be guaranteed $105,380 initially but hypothetically increases to $288,439 by age 67. Once the income has increased to $288,439 annually, this payment is locked in and can never go below $288,439 in the future.
On the other hand, a performance-based annuity may hypothetically generate an income of $381,349 a year for life starting at age 60, increasing to $636,610 a year by age 70. Once the income has increased to $636,610 annually, this payment is locked in and can never go below $636,610 in the future.
Can I Retire At 62 with $400,000 in a 401(k)?
Yes, you can retire at 62 with four hundred thousand dollars. At age 62, an annuity will provide a guaranteed level income of $21,000 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 $18,880 annually initially with the income amount increasing overtime to keep up with inflation.
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.
The longer you wait before starting the lifetime income payout, the higher the income amount to you will be.
Coupling both Social Security and an annuity with a lifetime income rider can provide a sustainable stream of income for the rest of your life, even if the annuity runs out of money.
Things To Consider When Retiring
- If you can’t afford to lose money, invest your savings without the risk.
- Inflation is rising whether you like it or not. Plan accordingly or decrease your lifestyle in the future.
- 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. Buy long-term care insurance now.
- There is a 100% chance you will die, buy cheap life insurance, or at the minimum, burial insurance for funeral expenses.
So, if you want to retire at age 62 with $400,000 in your 401(k), annuities are the best way to do it. Currently, there is no other retirement plan in the United States that can offer you a guaranteed income for life. You can request a quote from us to find out how much lifetime income you could receive from an annuity starting at just $400,000. Thanks for reading!