Very few of us want to continue toiling away at our jobs past the age of 60. People may say that the official age of retirement isn’t until years later, but there’s no reason you cannot retire early if you’ve put in the work and saved the money. But exactly how much money is needed to retire at this age?
People often ask, “Can I retire at 60 with $500K?”.
The answer is, “Yes”.
Here are four simple guidelines you should follow if you want to retire at the age of 60 with a nest egg of $500K.
1. Ditch The Mortgage ASAP
Debt and retirement are two stages of life that should never be combined. Markets can go through bizarre changes and laws could increase payments over time. The last thing you want pulling from your nest egg is an unstable and expensive monthly fee. One of the smartest things you can do to protect your 500K is to eliminate your mortgage and move into a smaller home.
Downsizing your living space might seem like a step backward in life, but it really isn’t. It’s a smart financial move that barely makes up for some of the poor financial decisions we often make in life. Buying a bigger or more expensive home is only going to add to your financial burden and increase the likelihood of running out of retirement funds ahead of schedule.
Selling your home could actually give you an opportunity to increase the size of your nest egg. It’s one of the few financial moves you can make that have a positive influence on your savings. Most other retirement tips simply help control your losses. However, there is another way you can continue to increase your savings despite a work-based income.
2. Don’t Stop Investing
Many retirees believe the investing game loses its value once you hit retirement. After all, you need that money to live on. But if you are capable of carefully managing your spending habits you can continue to invest and actually see gains for decades to come. Life expectancies are continuing to increase which means your potential earnings are increasing as well.
A retiree investment plan does not need to mean an aggressive investment plan. After all, the money is part of your nest egg and ideally, you don’t want to lose it. That’s why it’s a good idea to keep a portion of your savings invested in traditional high-quality stocks. The average return rate is around 7 percent, which makes it possible to even double your retirement savings during your lifespan.
But remember, investing is going to place an additional strain on your savings for a period of time. It needs to be combined with a strategic withdrawal plan to be as effective as possible.
3. Withdraw Using The 4 Percent Plan
If you’ve been planning for retirement for some time, then you’ve probably heard of the 4 percent plan before. It has been discussed at great length by some of the greatest financial experts in the industry over the years. The idea is to use simple mathematical principles to determine how much you can withdraw each month or year without running out of money while alive.
As the name implies, the number that experts like most is 4 percent. This means you should withdrawal 4 percent of your total savings during the first year of your retirement. You would withdrawal $20,000 during the first year with a $500,000 savings. That’s around $1,667 each month. The percentage would increase slightly each year to account for inflation.
This isn’t exactly an upper-middle-class living wage. You’re now wondering, “Can I retire at 60 with $500k and live on such a low monthly allowance?”.
The answer is, “You don’t have to”.
This withdrawal and investment plan will keep your nest egg alive and thus provide financial security. But there are ways to add to your income after retirement that don’t require working a 9-to-5. These sources of added income will increase what you can spend each month and allow for a more comfortable lifestyle.
4. Boost Your Income With Social Security
Navigating the waters of Social Security benefits can be tricky business. It’s even more difficult if you’re trying to retire at the age of 60. You won’t be able to begin receiving your SS benefits until you reach 62 and even then the amount you receive will only be a portion of your total benefits. You may have to wait until your 66 or 67 before you can receive your full benefits.
Even so, the portion you can receive at the age of 62 is enough to make a difference. Your secure nest egg and withdrawal strategy will mean that you don’t need to save the SS or try to invest it. It can go straight from your pocket to whatever expense you would like each month.
If you don’t feel you need the added income during the earlier years, then you can choose to withhold savings until a later date. It’s possible to delay your benefits until the age of 70. The longer you delay the benefits the more you will receive on a monthly basis. This can be a smart income strategy if you would like more spending power in the later years.
5. Work With A Professional
It’s always a good idea to work with a financial advisor anytime that significant savings are involved. A professional who understands their industry and who has plenty of experience working with retirees. You should be able to let them know the specifics of your situation and ask for help.
All you have to ask is, “How can I retire at 60 with $500K?”. This is a question that has been posed before and any financial expert worth their fees will be able to provide a solid answer. They can help you form monthly budgets, modified withdrawal plans, and investment strategies that tailor to your specific comfort level.
Stick To The Plan
Whether you create a plan with a financial advisor or develop one on your own, it’s important that you stick to it over the years. You may be tempted to push past your limits if you’ve experienced a good year, but it’s very easy to create a snowball effect. A few poor financial decisions can deplete a $500K nest egg quickly.
When your friends ask, “Can I retire at 60 with $500K?”. Tell them they can, but only if they make smart choices, work with professionals, and stick to the plan.