Can I Retire at 60 with $500k: Crucial Things to Know
Retirement is something which people need to start planning as early as possible. The main reason behind that is to allow them to build a sufficient corpus for them to live out the last phase of their lives in comfort, without the grind of full time jobs. The correlation is pretty straightforward, the earlier you start saving for retirement, the earlier you can retire. A lot of people wonder “Can I Retire at 60 with 500k?”. The answer to that depends on your lifestyle, spending habits and the place you live in. Let’s find out more about retiring at 60 with 500k.
Can I Retire at 60 with 500k: All Questions Answered
How do I plan to retire at 60 with 500k?
To plan your retirement at 60 with 500k, you need to start by accounting for the costs. When you account for the expenses, be realistic and keep inflation in mind. Plan for the food, housing, utilities, healthcare and transportation. These expenses are essential and unavoidable. On top of that, you also need to plan for the money you plan to invest on recreational activities. You do want to “enjoy” your retirement, right? To understand if you can retire at 60 with 500k, start by analysing your current spending habits. Try to be as accurate as possible. You can ignore some of the expenses like children’s education. Make a list of the current expenses. Then, you need to understand if any of those expenses are going to increase or decrease. For example, you can expect your medical bills to go up whereas, you can expect your mortgages and other such recurring expenses to go down. Your dependents would’ve also found their own footing and will most likely not depend on you for money.
Will I have new expenses after retirement?
Now, also account for the expenses that you think you will have once you retire. It is possible that you do not have some of those expenses at the moment. In the given amount, you can also add the social security benefits that you will be getting after your retirement. Remember that the benefits can be available as soon as you turn 62 but you can defer those withdrawals till the age of 70 as well. Deferring the social security withdrawals will increase the payout that you receive.
You can also think about moving to a cheaper and more affordable location for your retirement.
What should I keep in mind before calculating housing cost after retirement?
Do not take a hasty decision and instead look into various aspects of the housing before you move out. Calculate the housing cost, health care cost, transportation, crime rate, amenities, weather and recreational facilities available in the place you are planning to move to. Be mindful of the compromises and sacrifices that you will have to make while moving to a different area.
How early should I start saving to retire at 60 with 500k?
It is important to start saving early in order to reach the goal of 500k. You can even start by availing the retirement plans as these plans can often prove to be inexpensive ways of saving for your retirement. You can even avail the benefits of IRA. So, when you are using IRAs to plan your retirement, you are also saving the tax.
To conclude, we would just like to mention that it is possible to retire at 500k but it can prove to be challenging. It is easier to retire at 60 with this amount if you already own a house and if you do not have any debt by that age. You can take help of finance professionals as well. They can provide you with insight that you might not have by yourself.
How much difference does the location of retirement make?
To successfully retire at 60 with 500k, you can also try to relocate to some place which lowers your monthly living expenses if you’re willing to go that route. Retiring abroad in a destination that offers a change of scenery, new experiences, access to affordable health care, and—the big one—a lower cost of living is always a viable option. Take Ecuador for example, a retired couple can live comfortably over there for as little as $1,500 a month. Mexico, Panama, and Costa Rica, all offer affordable options for retirees.
In case you have a big home and you don’t really need all the excess rooms especially because your kids have moved out, you can sell it and buy a smaller house or rent one. The extra money can be used to bolster your retirement corpus. You can even buy an RV and move around the country.
How does social security contribute to my retirement corpus?
For anyone born in 1960 or later, the normal retirement age—the age at which you are entitled to full Social Security benefits—is 67. However, you don’t have to wait till 67 to start taking benefits. You can start it at the age of 62 itself. However, your monthly benefit will be reduced by 30%. The more you wait, the more your monthly benefits will be. You can delay your retirement benefits until age 70 for an even larger monthly benefit. As of January 2020, the average monthly benefit stands at $1,431.97. In case you can stretch your $500k as much as possible, the social security will kick in and give a great monthly cash infusion. However, you need to work for a certain number of quarters to qualify for social security.
“If you invest at an average return of 7% per year (not too big an “if”), your money will double every ten years. Therefore, if you have $500,000 at age 45, you can have $2 million at age 65 if you leave it alone. Why not work longer so you can enjoy life more? If you are going to live for 40 years or so (after retirement at 45) you might get awfully bored if you are not gainfully employed. And if you are living off savings that must last 45 years, your lifestyle will never get more opulent,” says John R. Frye, CFA, chief investment officer, Crane Asset Management, LLC, Beverly Hills, California.
Can I retire at 60 with 500k: Conclusion
Choosing the “right” age to retire isn’t very easy. If you retire too early, you might run out of money, If you retire too late, your health might not allow you to enjoy all the fun things that you intend to do after retirement.
If you want to retire at 60, it’s important to consider more than finances. “The tradeoffs for such a decision should not be taken lightly as you would give up some of your prime earning years, which not only provide greater retirement savings but because Social Security looks at years of work and earnings levels, your Social Security income would be greatly reduced in retirement. Further, if you were required to return to work you’d be at a huge disadvantage,” says Matthew J. Ure, vice president, Anthony Capital, LLC-Southwest Region, San Antonio, Texas.
And don’t forget the cost of health coverage. “Health insurance will be a significant expense until you reach Medicare age at 65, probably eating one third to one-half of your yearly expenses, depending upon where you live,” says Ross Haycock, CFP®, AIF®, vice president, Summit Wealth Group, Colorado Springs, Colorado.
Retiring early or retiring late can lead to the creation of similar problems among people. Some of these issues are loneliness, boredom, lack of purpose, and feeling out of touch. So, when it comes to retiring at 60 with 500k, you should keep everything in mind, both financial and emotional factors.