Can you really retire with $500,000 in savings and investments? (Yes, it's possible)

The average retirement savings in the U.S. is $249,300 for baby boomers and $192,300 for Gen X. But what if you’re working with roughly double that: Can you retire comfortably on $500,000?

The answer: It depends.

Your ability to retire on $500,000 comes down to two key factors: how much you spend and how you supplement your savings. Let’s break it down so you can see if this number is enough — and how to make it work if it’s not.

Can you realistically retire on $500,000?

The 4% rule for retirement is a common rule of thumb that says you can safely withdraw 4% of your savings each year without running out of money. If you’ve got $500,000 saved, that means you’d have about $20,000 per year — or $1,667 per month — to live on.

That’s not a lot, especially considering the average American retiree spends around $60,000 a year or $5,000 a month, according to economic data from the Federal Reserve. But that doesn’t mean retiring on $500K is impossible. It just means the math needs to work in your favor.

How to calculate if you can retire on $500K

Experts advise withdrawing no more than 5% of your retirement savings in your first year of retirement.

If you’re serious about making $500,000 last in retirement, budgeting is everything. The goal is to figure out what your actual expenses will be so you can see if your savings and any other income sources will cover them. Here’s where to start.

Step 1: List out your essential expenses

Your essential expenses will depend on your lifestyle, housing costs, overall health, insurance needs and family responsibilities, among other factors:

• Housing. Think mortgage, rent, property taxes, utilities, HOA fees, home insurance and maintenance. Even if you own your home outright, maintenance costs alone can run 1% to 5% of your home’s value per year.

• Food. The average retiree spends around $7,714 per year on food alone, according to a Federal Reserve expenditure study. This includes both groceries and eating out. Alcohol clocks in at around $494 for people ages 65 and older.

• Health care. Even with Medicare, you’ll still have premiums, copays and out-of-pocket expenses. Fidelity estimates that a 65-year-old couple will spend around $165,000 on medical costs in retirement.

• Transportation. Car payments, gas, auto insurance and maintenance add up. Even if you no longer drive, you may still have public transportation or ridesharing costs.

• Debt payments. If you still have credit card debt, personal loans or a mortgage, you’ll need to factor these into your plan. Paying debts off before retirement can free up a big chunk of your budget.

• Insurance. Beyond health insurance, you might need life or long-term care insurance, which can add hundreds of dollars per month to your expenses.

• Fun and leisure. Retirement is about enjoying life too, so you’ll need to budget for travel, hobbies, gifts and entertainment.

Now, add it all up. If your total expenses are over $20,000 a year, you’re likely to need more than $500K for a comfortable retirement — unless you have other income sources.

Dig deeper: How to budget in retirement: 7 steps to maintaining your finances on a fixed income

Step 2: Factor in Social Security and other income

Social Security payments can make a huge difference in whether retiring on $500,000 is enough. The average benefit is around $1,976 a month (or $23,712 per year), but your actual amount depends on how much you paid in and when you claim. If you’re married, your spouse’s benefits could increase your total household income too.

In addition to Social Security, you may have income from:

Don’t forget to add these in as you figure out if you can really retire on $500,000.

Step 3: Plan for inflation (because it’s inevitable)

Inflation is the sneaky budget killer of retirement. Even at the Fed’s target of 2% per year, some years it’s much worse — like in 2022, when inflation averaged over 6%. If your budget is tight at today’s prices, it’ll only get tighter over time.

Step 4: See how the math shakes out

Once you’ve added up your expenses and income, how does it look? If your expected income covers your spending, $500K might be enough with careful planning. If there’s a gap, you’ll need to look for ways to make $500K last longer in retirement.

Dig deeper: 5 retirement withdrawal steps to make your money last longer

How to make $500,000 work for your retirement

Here are the biggest levers you can pull to make retirement on $500,000 more feasible.

1. Choose the right place to live

Where you retire matters just as much as how much you’ve saved. The cost of living varies wildly across the U.S., and moving to a lower-cost area could drastically cut your expenses and stretch your retirement benefits.

These 10 states have the lowest cost of living in the U.S.:

1. West Virginia

2. Oklahoma

3. Kansas

4. Mississippi

5. Alabama

6. Arkansas

7. Missouri

8. Iowa

9. Michigan

10. Tennessee

🌎 Considering retiring abroad?

Some countries offer a much lower cost of living, especially if you’re open to adventure. Places like Mexico, Portugal, Thailand and Ecuador all have thriving expat communities and affordable health care.

Dig deeper: How all 50 states tax retirement income: A comprehensive list for 2025

2. Optimize your Social Security strategy

When you claim Social Security will have a big impact on how much you receive each month. Your benefit amount can be reduced, full or increased based on your age when you start.

For example, here’s how it plays out if your full benefit at age 67 — your full retirement age — is $1,976 per month:

• Claim at age 62 — your benefit could shrink to about $1,383 per month (a 30% reduction).

• Claim at age 67 — you’d receive the full $1,976 per month (your full retirement benefit).

• Claim at age 70 — your benefit could increase to up to $2,450 per month (a 24% boost).

That’s a difference of over $1,000 per month between claiming early and waiting until age 70. If you don’t need the money right away, delaying benefits could help make up for a smaller nest egg.

But if you’re entering early retirement on $500,000 and have years before Social Security kicks in, you might need to rely on your savings, investments or other income sources to bridge the gap.

Dig deeper: States that tax Social Security benefits — including changes for 2025

3. Consider working part-time

A part-time job has multiple benefits — it can help stretch your retirement savings, keep you active, and help you stay engaged with your community. Plus, places like Costco, Lowe’s and REI all have part-time jobs with health benefits.

Check out our roundup of the best jobs for seniors and retirees for more ideas. Even earning $10,000 to $15,000 per year could help you further stretch your $500K retirement savings.

4. Reduce your biggest living expenses

Another way to stretch $500K is to cut major expenses. Here’s where to look:

• Housing. The average retiree age 65 and over spends $21,445 per year on housing. This includes mortgage or rent, utilities and general upkeep. If your housing expenses are too high, you could downsize or move to a more affordable area. But be sure to weigh the pros and cons of buying a new home after retirement.

• Transportation. It’s estimated that the average retiree spends $9,033 per year on transportation. If you don’t drive much, selling a second car or switching to public transportation could free up thousands per year.

• Food. The average retiree spends $7,714 on food — both at home and away. It can feel nearly impossible to keep food costs down these days, but every little bit counts when you’re on a fixed income.

• Health care. The average retiree spends around $8,027 on health care each year, including premiums, medical services and supplies, and prescription drugs. You can help keep these costs down by using a health savings account (if one’s available to you) and by looking into supplemental insurance.

Dig deeper: 100 best discounts for ages 50+: Groceries, dining, retail, travel and more

Investment approaches to stretch your $500,000

How you pull money out of your accounts is also key to retiring on $500,000. You want to withdraw your money in a way that won’t drain your savings too quickly. Here are four approaches to consider.

1. Don’t forget to invest for growth

It’s tempting to play it safe by moving everything into cash or cash equivalents when you enter retirement, especially on a limited budget. But doing so can make your savings shrink faster than you expect.

Remember: Retirement can last 15 to 30 years or more. Ideally, you should have a conservative mix of stocks, bonds and cash to help your money last while keeping pace with the inflation rate.

If you’re looking to take the guesswork out of your investments, look into robo-advisors and strategies like dollar-cost averaging. Robo-advisors are ideal for those with limited investment experience or who prefer a hands-off approach, saving time on research and portfolio management, while dollar-cost averaging provides a structured way to grow your nest egg and manage risk.

Dig deeper: Common investing myths: Why you don’t need thousands to own stocks

2. Be careful of market timing risks

One major drawback to the 4% rule is that it isn’t always safe. Sometimes, retirees face a sequence-of-returns risk that throws the 4% rule out the window.

The sequence-of-returns risk is where you lose money early in retirement due to a market downturn. If the stock market crashes just as you start withdrawing funds, it can drain your savings much faster than expected.

There are several ways to protect against bad market timing:

1. Keep two to five years of cash reserves so you don’t have to sell stocks in a down market.

2. Withdraw less in bad years — if the market drops, temporarily reduce your withdrawals to preserve capital.

3. Use a flexible withdrawal strategy — instead of a flat 4%, consider adjusting based on market conditions.

Dig deeper: The 4% rule for retirement: Is it time to rethink this popular withdrawal guideline?

3. Withdraw money strategically

You can also use these retirement withdrawal strategies to make your $500K last longer:

• Start with taxable accounts before tapping into tax-deferred accounts, like traditional 401(k) or IRA accounts.

• Use Roth IRAs last, since withdrawals are tax-free.

• Be mindful of required minimum distributions (RMDs) at 73, which can increase your tax bill.

Dig deeper: 5 retirement withdrawal steps to make your money last longer

4. Look into annuities if you’d like guaranteed income

If you’re worried about outliving your savings, converting part of your $500K into a fixed annuity can provide steady, predictable income:

• Lifetime annuities pay you a fixed amount every month for the rest of your life.

• Term annuities pay out for a set number of years, which is ideal if you need extra income early in retirement.

• Joint annuities continue payments to a spouse after you die.

Dig deeper: What is an annuity? Here’s what you need to know before buying one

4 key ways a financial advisor can help

Retiring on $500,000 takes careful planning, no matter what your expenses are. The right financial advisor can help you make the most of your money in four important ways:

• Create a smart withdrawal strategy. A trusted financial advisor specializing in retirement can help you decide when to pull from taxable versus. tax-advantaged accounts, minimize taxes and time withdrawals to avoid penalties.

• Plan for healthcare costs. A financial advisor can help you budget for Medicare, Medigap and potential long-term care expenses to keep unexpected medical bills from derailing your retirement.

• Optimize your investments. Advisors can recommend a low-risk mix of stocks, bonds and annuities to balance growth with security.

• Align your plan with your goals. Whether you’re interested in traveling, downsizing or leaving a legacy for loved ones, an advisor can tailor a strategy that fits your vision for retirement.

Dig deeper: How to find a trusted retirement advisor: Factors to consider for peace of mind

Other stories in our retirement-planning series

FAQs: Retiring on $500K and stretching your savings

Learn more about planning for retirement with these common questions. And take a look at our growing library of personal finance guides that can help you save money, earn money and grow your wealth.

What is the average 401(k) balance for a 65-year-old?

The average retirement account balance for those ages 65 and older is about $272,588, according to a recent survey of 5 million Vanguard participants. But the median balance (which reflects what most people actually have) is much lower — around $88,500 for people ages 65 and older. Learn more about how your savings compare in our guide to average 401(k) balances by age.

Is retiring with $500,000 realistic?

For some people, yes. If you live in a low-cost area, maximize Social Security, have other income streams and keep expenses low, you could make it work. But for those with higher expenses, $500K may not be enough without additional income.

I own a home. Can I use home equity to invest in a rental or investment property?

You can use a home equity loan to buy a rental or investment property, but borrowing from your home equity is risky, especially if you don’t know if an investment is a sure thing. Among the two most popular ways to tap into your home’s equity are home equity loans and home equity lines of credit. Both types of loans are ways to borrow from the money you’ve already paid into your home, based on your home’s appraised value. And there are no restrictions as to how you can use the money you borrow. Learn more about the benefits and risks of tapping your home equity for a second home or investment.

What’s the difference between saving and investing?

The core difference between saving and investing lies in the accessibility of your money and the risks you take with it. Saving means keeping your money in secure accounts with little to no risk of losing your principal. On the other hand, investing involves buying assets like stocks, bonds or mutual funds that can potentially earn higher returns. Learn more in our guide to saving and investing to find the best approach for your money and financial goals.

How much does the average person retire with?

The median retirement savings for all U.S. households is around $87,000, according to the Federal Reserve. This means most people retire with far less than experts recommend. They often rely on Social Security, pensions, or part-time work to fill the gap.

Sources

About the writer

Cassidy Horton is a finance writer who specializes in banking, insurance, lending and paying down debt. Her expertise has been featured in NerdWallet, Forbes, MarketWatch, CNN, USA Today, Money, The Balance and Consumer Affairs, among other top financial publications. Cassidy first became interested in personal finance after paying off $18,000 in debt in 10 months of graduation with an MBA. Today, she’s committed to empowering people to stand up and take charge of their financial futures.

Article edited by Kelly Suzan Waggoner