Everyone needs to plan their retirement when they are in 20s so that they can save enough to be able to retire by the age that they are targeting. Many experts believe that you must have a corpus of $ 1 Million to be able to retire but we do not agree. This amount depends on the lifestyle, state and the spending habits. The main question is if you can retire at 500k and let us together explore the answer.
To plan your retirement at 500k, you need to start by accounting for the costs. Be realistic while account for the various expenses and do not forget to account for the inflation too. You would need to plan for the food, housing, utilities, healthcare and the transportation. These are the basic necessities but you would also need to plan for expenses that you will incur in the recreational activities. To understand if you can retire at 60 with 500k, start by looking at the points below
- The first step should be the analysis of your current spending habits. You need to be very accurate with that. You can probably ignore some of the expenses like the children’s education. Before you jump on to that step, make a list of all the expenses that you are incurring presently.
- In the next step, you need to understand if any of those expenses are going to increase or decrease. For example, you can expect your medical bills to go up whereas, you can expect your mortgages and other such recurring expenses to go down.
- Now, also account for the expenses that you think you will have once you retire. It is possible that you do not have some of those expenses at the moment.
In the points above, we just tried to evaluate the cost that you will incur to maintain your present standard of living. In the given amount, you can also add the social security benefits that you will be getting after your retirement. Remember that the benefits can be available as soon as you turn 62 but you can defer those withdrawals till the age of 70 as well. Deferring the social security withdrawals will increase the payout that you receive.
Another point to consider while making these calcualtions is if you can move to a more affordable location after you retire. Do not take a hasty decision and instead look into various aspects of the housing before you move out. Look at the housing cost, health care cost, transportation, crime rate, amenities, weather and recreational facilities available in the new area that you plan to make. Understand the kind of tradeoffs that you will have to make while moving to a different area.
Moreover, it is also important to start saving early in order to reach the goal of 500k. You can even start by availing the retirement plans as these plans can often prove to be inexpensive ways of saving for your retirement. You can even avail benefits of IRA and remember that IRAs are tax deductible. So, when you are using IRAs to plan your retirement, you are also saving the tax.
To conclude, we would just like to mention that it is possible to retire at 500k but it can prove to be challenging. It is easier to retire at 60 with this amount if you already own a house and if you do not have any debt by that age. It is better to take professional advise while planning your golden years ahead.