Is Retiring on $600,000 Possible? | ETF Trends

Is it possible to retire with $600,000 in savings? According to retirement, investing, and estate planning expert Rebecca Lake, it’s certainly possible. However, it’s not easy — and requires careful planning.

Over at SmartAsset, Lake notes that whether someone can successfully retire with $600,000 depends on several factors, including their retirement age, estimated retirement budget, expected longevity, and total savings and income.

The younger the retirement age, the longer that retirement nest egg must last — especially if the retiree has a longer life expectancy. Lifestyle can also affect how far $600,000 will go in retirement. Inflation and market volatility can also influence overall retirement outcomes. Health can also be a factor, especially since healthcare costs often increase as retirees get older.

According to Lake, how long $600,000 will last in retirement largely depends on the withdrawal rate. A standard guideline for retirement savings withdrawals is the 4% rule, which suggests withdrawing 4% of retirement savings per year to live on. In theory, a retiree expecting to spend 30 years in retirement should be able to withdraw 4% of their savings each year and not run out of money.

For anyone looking to retire with $600,000 in savings, planning early is crucial. Someone with a 401(k) should focus on maxing out that account first. It’s important to save enough to qualify for the full employer match if one is provided.

Those without a 401(k) can still save with an Individual Retirement Account. A traditional IRA can offer tax-deductible contributions. While a Roth IRA offers no deduction, qualified withdrawals are tax-free. A SEP or SIMPLE IRA, which have higher annual contribution limits than traditional or Roth IRAs, could be good options for anyone who’s self-employed.

Those looking to retire with $600,000 may also want to create an additional stream of income with an annuity, which is an insurance contract where you pay a premium in exchange for receiving payments back later. And while there are different types of annuities, they can all create guaranteed income.

“How long will $600,000 last in retirement? The answer can be different for everyone,” Lake writes. “Creating a retirement budget can give you an idea of how much you’re likely to spend and what you’ll need to draw from your savings each year. From there, you can decide if $600,000 is a realistic goal or whether you should be aiming to save more for retirement.”

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For more news, information, and strategy, visit the Retirement Income Channel.