Is 500k a lot of money?
Savings of $500,000 may sound like a lot of money. And it is. But if you retire at age 45 to live off of it alone, it may not last very long unless you live very frugally. Even then, it may get consumed while you're still living.
Based on that figure, an annual income of $500,000 or more would make you rich. The Economic Policy Institute uses a different baseline to determine who constitutes the top 1% and the top 5%. For 2021, you're in the top 1% if you earn $819,324 or more each year. The top 5% of income earners make $335,891 per year.
Yes, it is possible to retire comfortably on $500k. This amount allows for an annual withdrawal of $20,000 from the age of 60 to 85, covering 25 years. If $20,000 a year, or $1,667 a month, meets your lifestyle needs, then $500k is enough for your retirement.
How much do people save for retirement? In 2022, about 46% of households reported any savings in retirement accounts. Twenty-six percent had saved more than $100,000, and 9% had more than $500,000. These percentages were only somewhat higher for older people.
According to Schwab's 2023 Modern Wealth Survey, Americans perceive an average net worth of $2.2 million as wealthy. Knight Frank's research indicates that a net worth of $4.4 million is required to be in the top 1% in America, a figure much higher than in countries like Japan, the U.K. and Australia.
In 2020, according to Pew Research Center analysis, the median for upper income households was around $220,000 and the median for middle income households was slightly above $90,000.
Savings of $500,000 may sound like a lot of money. And it is. But if you retire at age 45 to live off of it alone, it may not last very long unless you live very frugally. Even then, it may get consumed while you're still living.
The short answer is yes, $500,000 is enough for many retirees. The question is how that will work out for you. With an income source like Social Security, modes spending, and a bit of good luck, this is feasible. And when two people in your household get Social Security or pension income, it's even easier.
The answer is yes, almost 1 in 3 retirees today are spending between $2,000 and $3,999 per month, implying that $4,000 is a good monthly income for a retiree.
If you cut expenses by $4,000 per year or $11 per day, the numbers work to retire at age 60 with $500,000. “If you choose to live on $45,000 per year, you could claim Social Security at age 62 and fully fund your retirement until age 90.”
Where should I be financially at 35?
Overall, the rule of thumb is to judge by your salary. Typically, by the time you enter retirement you want to have 10 times your annual salary saved up in your retirement fund. One common benchmark is to have two times your annual salary in net worth by age 35.
Americans are far more likely to have no assets (15% of respondents) or less than $50,000 (29%) than they are to have $500,000 or more (19%). About one in four Black (26%), Native American (26%) and Hispanic (25%) Americans have no liquid investable assets.
| Age by decade | Average net worth | Median net worth |
|---|---|---|
| 30s | $277,788 | $34,691 |
| 40s | $713,796 | $126,881 |
| 50s | $1,310,775 | $292,085 |
| 60s | $1,634,724 | $454,489 |
- They Have a Calm, Confident and In-Control Vibe. ...
- They're Resilient. ...
- They Have an Elegant but Understated Sense of Style. ...
- They're Well Connected. ...
- They're Financially Literate.
But data from the U.S. Census Bureau cites a different number as the average salary: just under $75,000. What does this all mean? By the Census data, it means that if you earn between $50,000 and $150,000 a year, you are considered middle class.
But while everyone in this group is rich, it does not mean they are wealthy. To be considered wealthy, your assets must be more substantial than your liabilities, with them generating an income large enough to cover your fixed expenses (such as rent or mortgage payments, car payments and insurance premiums).
Breaking Down the Middle Class by Income
One way some researchers divide individuals into economic classes is by looking at their incomes. From that data, they split earners into different classes: poor, lower-middle class, middle class, upper-middle class and wealthy.
Middle class: Those in the 40th to 60th percentile of household income, ranging from $55,001 to $89,744. Upper middle class: Households in the 60th to 80th percentile, with incomes between $89,745 and $149,131. Upper class: The top 20% of earners, with household incomes of $149,132 or more.
In 2022, over 34% of American households made over $100,000. This puts you in the top 24% of the US population.
The Pension & Lifetime Savings Association estimates that you need a private pension pot of £300,000-£500,000 (which you have) and total pension income of around £36,000, including the state pension, for a moderately comfortable retirement.
Can I retire with 700k?
The keys will be controlling expenses, utilizing tax-advantaged accounts strategically, having supplemental income sources if possible, and making sure you have health insurance coverage figured out. With proper planning and discipline though, many find $700k is an adequate amount to retire on at 50.
At the time of writing the median household income in the United States was about $70,800, so you would plan for a retirement income of $56,640. At that rate of withdrawal, a $750,000 portfolio would last a minimum of 13 years.
Depending on how you manage your money, you can probably expect an annual income between $48,000 (at roughly $4,000 per month) and $63,000 (at roughly $5,300 per month). More is possible if you invest for more aggressive returns, but that will mean taking on more risk.
Assuming you took all of this into consideration and felt that 4% is a good target, your expected income would be $20,000 ($500,000 X 0.04%) in the first year. In this scenario, for a couple retiring with $500,000, total first-year income equals $90,000 ($20,000 from savings + $70,000 from Social Security).
Around the U.S., a $1 million nest egg can cover an average of 18.9 years worth of living expenses, GoBankingRates found. But where you retire can have a profound impact on how far your money goes, ranging from as a little as 10 years in Hawaii to more than than 20 years in more than a dozen states.
