Is $600,000 Enough To Retire? What The Numbers Actually Say

If you have $600,000 invested for your later years, you have more money than many people do for retirement.

In fact, the average 401(k) balance among Baby Boomers is $249,300 according to Fidelity, while the average IRA balance is $257,002. But, does that mean you have enough money? Is $600K going to provide you with financial security, or should you keep working and saving longer?

Here’s what the numbers look like, so you can better understand what retirement with a $600,000 nest egg would mean for you. 

How much income does $600,000 in retirement investments produce?

While $600K is undoubtedly a lot of money, it’s not necessarily as much as you’d think when you have to make it last for decades. You can’t withdraw the money all at once, or even withdraw too much of it at any one time, or you’ll drain your accounts too low, and risk your accounts running dry. 

One simple way to determine how much to withdraw is to follow the 4% rule. This rule was created to help retirees choose a safe withdrawal rate and make sure their money has good odds of lasting 30 years. While some experts now advise being a little more conservative and staying closer to a 3.7% withdrawal rate, the 4% rule is still widely accepted as a benchmark and can give you a fairly good idea of what income your nest egg would produce.

If you follow the 4% rule, you’d be looking at withdrawing 4% of your $600,000 balance during your first year of retirement, then making adjustments in subsequent years to account for the impact of inflation. So, since 4% of $600K is $24,000, you would have this much income from your investments — if you wanted a reasonable chance of making sure you don’t run out of money in your accounts while you are still relying on them to provide income.

Can you live on $600K as a retiree?

So, now you know around how much income your nest egg will produce. But is it enough? That’s going to depend on a lot of factors, including:

• The amount you were earning in the past, and the amount you need to maintain your standard of living
• Extra costs you could incur as a retiree, such as health insurance premiums if you are retiring before becoming eligible for Medicare, or out-of-pocket healthcare costs if you have high prescription drug needs 
• The age when you are retiring and how long you need your money to last

For some people, $24,000 will combine with Social Security to produce plenty of money to live on. For others, though, who may want to retire before they can or should claim Social Security or who were high earners during their career and want to maintain their standard of living in retirement, it would fall far short.

You should consider working with a financial advisor to determine what your income needs will be in your later years, whether your retirement investments can meet them, and what the risks are of retiring with your current savings level. With this professional advice, you can decide whether your $600K is plenty or whether you want to work more, save more, and have more financial security to enjoy your life as a retiree.

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