Can You Retire on $500K Plus Social Security? - Adviser Investments

Can You Retire on $500K Plus Social Security?

May 25, 2022
One of the most popular questions we receive is:
Can I retire on $500K plus Social Security (or $700K, $2 million, etc.)?
The short answer: maybe.

No matter how much savings you have, your answer depends on three key factors:

Anticipated Retirement Expenses

Investment Returns and Time Horizon

Social Security Income Maximization

Anticipated Retirement Expenses

Let’s start with anticipated retirement expenses, since you have the most control over how you spend your money and, therefore, how long you can stretch your $500K plus Social Security.

Tip: Get a clear picture of your spending and cash flow. Use our detailed budget worksheet to track your monthly expenses and income.

Health Care and Housing Are Your Largest Retirement Expenses

Health care is likely your largest retirement expense, followed by housing.

When budgeting for health care, plan for Medicare premiums, medications, copays and other out-of-pocket expenses. For example, Medicare doesn’t generally cover routine dental, eye or hearing exams, or correctives like dentures, eyeglasses or hearing aids. (Medicare Advantage plans may cover some of these expenses.)

Listen to our podcast Medicare Made Simple to understand Medicare and how to view it as part of your broader retirement plan. Also, keep informed by bookmarking our exclusive health care suite of material.

Fidelity provides a simple calculator to help you forecast how much health care will typically cost in retirement. Using the calculator, a 65-year-old woman retiring at age 68 with a life expectancy of 93 should plan to save $177,388 for health care in retirement.

When budgeting for housing, include mortgage or rent, homeowner’s insurance, utilities, property taxes and maintenance.

Retire on 500K Plus Social Security

Important Budgeting Considerations

When thinking about your budget ask yourself: Does your spending align with your retirement goals? If not, it’s time to prioritize. Also, try to avoid taking on debt as you approach retirement.

Tip: For straightforward financial advice from our experts, subscribe to The Adviser You Can Talk To Podcast. Also, receive bi-weekly market trends and analysis of critical investment topics via your inbox when you sign up for our Adviser Fund Update newsletter.

Investment Returns and Time Horizons

Investment returns play a key role in answering the question: How long will my retirement savings last with Social Security?

Not surprisingly, there’s no one answer, since your returns are based upon several factors, including:

  • Asset Allocation and Risk Tolerance
  • Economic and Market Conditions
  • Investment Costs and Taxes
  • Retirement Spending Plan
  • Time Horizon (i.e., how much longer will you allow your money to grow?)

Many investors overlook the significance of their retirement spending plan as it relates to their overall investment returns, which is to say how you withdraw your money during retirement impacts how long your money will last.

To understand how successful your current retirement spending plan is, download our complimentary Retirement Spending Solutions report. It analyzes the merits and flaws of common retirement withdrawal plans we’ve come across.

Social Security Income Maximization

Maximizing your Social Security retirement benefits has two components:

Collecting as much as possible.

Hanging onto as much as possible (by minimizing taxes).

Most investors focus on the first component. However, if you want to retire with $500K plus Social Security, then equal attention should be given to both.

Tip: To collect as much as possible, it pays to wait beyond your full retirement age.

You can collect a significant amount more if you wait:

If you were born between 1943 and 1954 your full retirement age is 66. Therefore, if you start receiving retirement benefits at age:

, you’ll get 108% of the monthly benefit because you delayed getting benefits for 12 months.

, you’ll get 132% of the monthly benefit because you delayed getting benefits for 48 months.

When you reach age 70, your monthly benefit stops increasing even if you continue to delay taking benefits.

Key Social Security Resources:

           Social Security Family Benefits

            How Income Affects Social Security Benefits

            Social Security Family Benefits

            Social Security Benefits Quick Calculator

 

Reduce Taxes (Hang On to Your Money)

Retaining as much as possible requires financial modeling of all assets and income (beyond your Social Security retirement benefits), ultimately pinpointing a retirement income spending plan that minimizes your taxes.

While counterintuitive, some investors keep more money in their pocket by claiming Social Security early, because it places them in a lower tax bracket.

Tip: For every investor, there’s a breakeven for knowing when to file for Social Security.

Next Steps

Can you retire on $500K plus Social Security? It’s possible.

But it’ll require you to optimize your budget, investment returns, Social Security retirement benefits, and also coordinate a retirement income spending plan that minimizes taxes.

Our financial planners regularly use financial modeling strategies to answer the question: How long will my retirement savings last with Social Security?

If you want to know how long your savings will hold out, contact Adviser Investments anytime for assistance. We pride ourselves on being The Planner You Can Talk To.

Related Special Report

Social Security’s Role in Your Retirement

Tax and legal information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice.  Personalized tax advice and tax return preparation is available through a separate, written engagement agreement with Adviser Investments Tax Solutions. We do not provide legal advice. Always consult a licensed attorney or tax professional regarding your specific legal or tax situation.

Our statements and opinions are subject to change without notice.  All investments carry risk of loss and there is no guarantee that investment objectives will be achieved.

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