NEW YORK, NY – As individuals approach retirement age, the question of whether their savings are adequate becomes a growing concern. One common scenario involves retiring at 60 with a $500,000 401(k) while working part-time. In order to determine the feasibility of this plan, it is important to understand retirement savings recommendations, part-time earnings, Social Security, and the potential monthly income that a 401(k) can generate.
According to Fidelity Investments, individuals should strive to save at least one times their salary by age 30, three times by 40, six times by 50, eight times by 60, and 10 times by 67 to maintain their preretirement lifestyle. Another approach, the Rule of 25, suggests determining the total retirement savings target by multiplying annual withdrawal needs by 25.
A $500,000 401(k) can generate varying amounts of monthly income, depending on withdrawal strategies and market conditions. For instance, if following the commonly used 4% rule, it would provide an annual income of $20,000, translating to approximately $1,667 per month, assuming that the total amount lasts for at least 25 years.
Data from the 2022 Current Population Survey Annual Social and Economic Supplement (CPS ASEC) reveals that the average retirement income for U.S. adults 65 and older is $75,254 annually, or about $6,271 per month. However, the median income for this age group is lower, at $47,620 annually. Based on these figures, the income from a $500,000 401(k) alone might be insufficient for many retirees, especially if their goal is to achieve a retirement income close to the median or average figures.
Part-time work income varies based on industry, location, and hours. While a part-time job yielding $15,000 annually could supplement the 401(k) income, it might not fully bridge the savings gap.
When considering early retirement at 60, it’s important to note that Social Security benefits are not available at this age. Eligibility for these benefits begins at 62, with the option to delay for higher monthly payments. Medicare health benefits are not available until age 65.
In addition to exploring other investments like individual retirement accounts (IRAs), stocks, bonds, mutual funds, or real estate for additional income streams, retirees should also consider downsizing, budgeting, and cutting nonessential expenses to make their savings last longer. Seeking professional guidance to develop a personalized retirement strategy is also recommended, as well as exploring annuities for a potential steady income stream, and factoring in healthcare costs and exploring options like Medicare, supplemental insurance, and health savings accounts.
In conclusion, retiring at 60 with a $500,000 401(k) and working part-time is a possibility for some, but it is important to carefully assess savings, earnings, and potential income from all possible sources in order to make an informed decision about when to retire and how to financially prepare for the future.