![10846633_s]()
I’m 62 years old and concerned that I might lose my job. If that happens, would I be able to retire early on the $500,000 I have in my retirement accounts? –Michael M.
The answer comes down to how much annual income you can realistically expect to count on the rest of your life if you stop working now and whether that income would be sufficient to fund a retirement lifestyle you consider acceptable.
It’s impossible, of course, for me to give you a definitive answer without having a lot more specifics about your finances as well as what sort of post-career life you envision. But I can suggest a process that should at least enable you to come away with a decent idea of how you might fare.
Let’s start with estimating your potential retirement income. A half a million bucks is an impressive sum and certainly a lot more than most people have managed to accumulate. But assuming you’ll need to pull income from your $500,000 for at least 30 years — a reasonable assumption given today’s long life spans and the fact that you don’t want to risk depleting your savings stash too early in retirement — you’re probably looking at drawing roughly 4% of your nest egg’s value initially and then increasing it for inflation each year to maintain purchasing power. So we’re talking about real, or inflation-adjusted, income from savings of somewhere around $20,000 a year.
You can start with a smaller draw, say, 3% or $15,000, if you want more assurance you won’t outlive your savings. Or you can pull out more, maybe 5% or $25,000, if you’re willing to take a greater chance of running out of savings late in retirement in return for more spending cash in the early years.
By going to this retirement income calculator, you can see how long your money might last at different withdrawal rates and for periods longer or shorter than 30 years. But $20,000 a year is a good ballpark estimate for how much sustainable retirement income you should be able to get from your $500,000 in savings.