See what it's like to retire on $500k, with examples showing calculations, as well as tips on how to make that money last.
Most people don’t have millions of dollars, and it’s common to retire with $500,000 or so. In fact, most of my clients have somewhere between a few hundred thousand and several million saved for retirement. Whether or not that will be sufficient depends on several factors, such as your spending, location, income sources, health issues, luck, and other factors.
Of course, it’s easier to retire comfortably with more money, but that’s not the reality for most people. So, it’s crucial to understand how things might unfold. Take steps to improve the chances of your money lasting for the rest of your life, and be aware of some potential pitfalls.
You’ll likely have to pay taxes in retirement, but with retirement savings of $500,000, the tax burden might be smaller than you expected. That’s especially true if you’re taking relatively small withdrawals each year. For example, if Social Security or a pension provides a meaningful amount of income, any withdrawals from pre-tax retirement accounts could be small. They’ll be even smaller if you have money in Roth IRA, 401(k), 403(b), etc.—and if you qualify for tax-free income from those accounts.
Be sure to triple-check your numbers, and run calculations using multiple sources if you’re doing all of this on your own. Unless you build a calculator yourself, you can’t know exactly what assumptions and processes the calculator relies on. In many cases, simplified online retirement calculators miss important details.
Even with inflation, taxes, and health care costs in retirement, $500,000 can be a sufficient nest egg for many people. With some careful analysis, you can learn what it might look like in your situation.
Please remember that any calculators shown here, rules of thumb, and other strategies discussed cannot guarantee that your money will last. The most secure source of income is a government-guaranteed payment, and anything else has the potential to end.
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Justin Pritchard, CFP® is a fee-only fiduciary advisor who can work with clients in Colorado and most other states.
CHAPTERS: 00:00 Intro and Reality 00:34 Factors That Affect Success 01:20 Spending Levels and Patterns 02:18 Retirement Income Sources (Like Social Security) 03:13 Single Person Example and Calculations 05:50 Double-Check With Right Capital (Cash Flows, Tax, and Strategies) 09:13 Couple Example and Calculation 10:52 Withdrawal Rates: Is 4% The Right Number? 13:26 What About Taxes in Retirement? 15:23 Live Off the Interest vs. Spending Principal 17:10 Tips to Improve Your Chances
IMPORTANT: It's impossible to cover everything you need to know in a video like this. The only thing that's certain is that you need more information than this. Always consult with a CPA before making decisions or filing a tax return. This is general information and entertainment, and is not created with any knowledge of your circumstances. As a result, you need to speak with your own tax, legal, and financial professional who is familiar with your details. This video is not a substitute for individualized, personal advice. Please verify with your plan administrator when employer plans are involved. This information may have errors or omissions, may be outdated, or may not be applicable to your situation. Investments are not bank guaranteed and may lose money. Opinions expressed are as of the date of the recording and are subject to change. ““Likes” should not be considered a positive reflection of the investment advisory services offered by Approach Financial, Inc. The Comments section contains opinions that are not the opinions of Approach Financial, Inc., and you should view all comments with skepticism. Approach Financial, Inc. is registered as an investment adviser in the state of Colorado and is licensed to do business in any state where registered or otherwise exempt from registration.
