The dream of retiring comfortably has just become a bit less expensive for most Americans, a recent study shows. Do you have enough socked away?.
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For many people, retiring with enough cash to live comfortably seems like a tougher goal to hit these days. The good news is that the magic number to retire comfortably is lower today than in 2024, when it hit $1. 46 million. The 2025 Planning & Progress Study by Northwestern Mutual puts that figure at $1. 26 million — still completely out of reach for some, but moving in the right direction.
Nowadays, retirement planning poses some unwelcome challenges, such as the funding shortfall for Social Security and Medicare, an aging population, rising prices on many essentials and inflation. This is why people in the U.S. have different ideas about how much money they will need to retire comfortably. But the magic number is usually just north of $1 million, according to industry studies.
In California, you need about $1. 41 million. A study from May 2025 by GoBankingRates found that the amount needed to retire comfortably in Hawaii is more than $2 million.
Retirement. That magical phase of life where you’re supposed to kick back relax, and enjoy the fruits of your decades of labor. But there’s always that nagging question – have I saved enough? If you’ve managed to stash away $500,000, you might be wondering if that nest egg is sufficient for your golden years.
Take a look at this surprising fact: $500,000 could be enough to retire comfortably. Really? That “you need a million dollars to retire” thing isn’t true for everyone.
I’m going to show you how far a half-million dollars can go, what factors affect your retirement savings, and some ways to make your money last longer. Since we all know that planning for retirement is personal and your needs are different from everyone else’s,
The Reality of Retirement Savings in America
Before we dive deep, let’s look at what most Americans actually have saved for retirement:
- According to the Federal Reserve, the median retirement savings for Americans aged 55-64 is just $171,000
- Most people in the U.S. retire with significantly less than $1 million
- The Northwestern Mutual’s 2025 Planning and Progress Study found people believe they need around $1.26 million for retirement
So if you’ve managed to save $500,000, congrats! You’re actually ahead of the average American. That’s a healthy nest egg that can provide a good foundation for retirement when combined with other income sources.
How Far Will $500,000 Really Go?
Let’s crunch some numbers. Using the old 4% withdrawal rule, which is a common way to plan for retirement, a $500,000 nest egg could give you about $20,000 a year in income that is adjusted for inflation.
When combined with Social Security benefits (which average about $2,000 monthly for many retirees), your annual income might look something like this:
| Income Source | Annual Amount |
|---|---|
| $500,000 Savings (4% withdrawal) | $20,000 |
| Social Security (average benefit) | $24,000 |
| Total Annual Income | $44,000 |
Is that enough? Well it depends on several crucial factors.
Factors That Determine If $500,000 Is Enough
1. Your Desired Lifestyle
Be honest with yourself – do you envision a retirement filled with international travel and expensive hobbies? Or are you more content with a simpler lifestyle focused on family community and low-cost activities?
How far your money goes will depend a lot on how you spend it. As long as you don’t plan to spend too much, $500,000 plus Social Security might be enough.
2. Geographic Location
Where you choose to live during retirement can dramatically affect your finances. Living in Manhattan? Your half million won’t last nearly as long as it would in rural Tennessee.
Some of the most affordable places for retirees include:
- Southern states like Georgia, Alabama, and Mississippi
- Midwestern locations like Iowa, Indiana, and Missouri
- Certain areas in the Southwest like parts of Arizona and New Mexico
If you’re open to relocating, your retirement dollars can stretch much further.
3. Health and Healthcare Costs
This is a biggie. According to the 2024 Fidelity Retiree Health Care Cost Estimate, an average 65-year-old retiring last year might need $165,000 in after-tax savings just for healthcare costs in retirement. And that doesn’t include long-term care!
Medicare helps, but it won’t cover everything. Your health status and anticipated medical needs should be a major consideration when determining if $500,000 is enough.
4. Longevity
How long will your money need to last? If you retire at 67 and live to 87, that’s 20 years your money needs to cover. If you live to 97, that’s 30 years!
Family history, current health status, and lifestyle all play roles in your potential longevity. The longer you expect to live, the more carefully you’ll need to manage your withdrawal rate.
5. Inflation
Inflation is like a silent retirement killer. What costs $100 today might cost $150 or more in 15 years. While Social Security benefits typically receive cost-of-living adjustments, your savings need to grow enough to offset inflation’s impact.
That’s why just keeping retirement money in cash is usually a bad idea. Your investments need to at least keep pace with inflation (which historically averages around 3-3.5% annually).
Strategies to Make $500,000 Last Longer in Retirement
If you’re approaching retirement with $500,000, here are some powerful strategies to maximize your savings:
Consider Working a Few More Years
Each additional year you work provides triple benefits:
- More time to save and grow your nest egg
- Fewer years your savings need to last
- Potentially higher Social Security benefits if you delay claiming them
Even working part-time during early retirement can significantly reduce pressure on your savings.
Optimize Social Security Benefits
The difference between claiming Social Security at 62 versus waiting until 70 can be as much as 76% more in monthly benefits! If you can afford to wait, your guaranteed lifetime income will be substantially higher.
Reduce Housing Costs
For most Americans, housing is their biggest expense. Consider:
- Downsizing to a smaller home
- Relocating to a lower-cost area
- Exploring options like house-sharing or accessory dwelling units
Diversify Your Income Sources
Don’t rely solely on withdrawals from your $500,000. Look into:
- Part-time work or consulting in your field
- Rental income from a property
- Annuities that provide guaranteed income
- Passive income streams from hobbies or interests
Invest Appropriately for Your Age
While you’ll want to be more conservative with investments as you age, being too conservative can be just as risky as being too aggressive. A properly diversified portfolio that includes some growth investments can help your money last longer.
Real Examples of Retiring on $500,000
Let me share a couple examples of how real people make $500,000 work in retirement:
Example 1: Barbara and Tom in Arizona
This couple moved from California to Arizona after retirement. They own their home outright and receive a combined $3,200 monthly from Social Security. They withdraw about $1,500 monthly from their $500,000 portfolio. Their total monthly income of $4,700 covers their modest lifestyle comfortably in their lower-cost location.
Example 2: Michael in Michigan
As a single retiree, Michael receives $2,000 monthly from Social Security. He supplements this with about $1,200 monthly from his $500,000 nest egg. He’s chosen to work part-time at a local garden center (a hobby he enjoys) that provides an additional $800 monthly and keeps his withdrawal rate sustainable.
Common Questions About Retiring with $500,000
Can I retire at 67 with $500,000 in an IRA and $2,000 monthly from Social Security?
Yes, this combination could work for many retirees, especially those with modest spending needs and those living in areas with reasonable costs of living. Your combined income would be around $4,000-$5,300 per month depending on how you structure your withdrawals and investments.
How long will $500,000 last in retirement?
With a 4% withdrawal rate adjusted for inflation, $500,000 could theoretically last 25-30 years. However, this depends on investment returns, inflation rates, and your withdrawal strategy. Some financial planners now recommend lower withdrawal rates (3-3.5%) for greater certainty.
Should I use my $500,000 to buy an annuity?
Annuities can provide guaranteed income for life, which some retirees find comforting. However, they come with fees and less flexibility. Many financial advisors recommend considering a partial annuity strategy – perhaps using a portion of your savings to secure a base level of guaranteed income.
What if I have unexpected expenses in retirement?
This is where having an emergency fund separate from your retirement portfolio becomes crucial. Try to maintain 1-2 years of essential expenses in cash or cash equivalents to avoid selling investments during market downturns.
The Bottom Line: Yes, $500,000 Can Be Enough
So, is half a million enough to retire on? For many Americans, especially those who:
- Have paid off their mortgage
- Live in areas with reasonable costs of living
- Have access to Medicare and supplemental health insurance
- Maintain modest spending habits
- Receive Social Security benefits
The answer is a qualified yes. While $500,000 won’t fund a lavish lifestyle, it can definitely provide a comfortable retirement when combined with Social Security and other potential income sources.
Remember that retirement planning isn’t one-size-fits-all. Your personal situation, goals, and needs are unique. Working with a financial advisor who specializes in retirement planning can help you develop a customized strategy to make your $500,000 work harder for you.
What’s your retirement savings goal? Are you worried about having enough? Share your thoughts in the comments below!
Disclaimer: This article is for informational purposes only and should not be considered financial advice. Always consult with a qualified financial professional before making important retirement decisions.
Are millennials prepared? (or not so much)
Millennials favor protecting their retirement the most out of all generations, but only 43% feel fully prepared. Whats troubling is that nearly 47% (46. According to a study by Go Banking Rates, 51% of people have savings balances of less than $500, and only 19% have balances over $2,000. Thats a long way from the magic number of $1. 26 million. Its no wonder nearly 35% of all millennials are extremely stressed about their lack of savings.
According to Millennial Money, millennials have unique buying habits and preferences — they statistically spend less on major purchases like homes, cars and retirement. But they tend to spend big on travel, dining out and technology. To pay for those luxuries, 34% of millennials plan to keep a full-time job in retirement. Even so, on average, millennials spend an average of $52,000 per year, which is less than both Gen X and boomers.
Close to 60% of millennials say they place too much emphasis on building wealth and growing their assets, and admit to not dedicating enough time to protecting their assets and managing against risks with life insurance or disability insurance.
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To be able to retire well, Fidelity says you should save at least 10 times your yearly income by age 67. On top of that, consider saving 15% of your income annually, while also factoring in your desired lifestyle and other income sources like Social Security.
Still, it seems the $1 million mark falls far short of the average amount that most U.S. adults have saved for retirement. About 20% of Gen Zers and 26% of millennials feel they are behind in saving for retirement, while only 45% of Gen Xers and 30% of baby boomers have confidence in retiring when and how they want, per the 2025 State of Retirement Planning study by Fidelity.
Given that 11,000 Americans will turn 65 every day through 2027, only around half of all boomers and Gen Xers believe they’ll be financially ready for retirement when the time comes.
Whether you are a 401(k) millionaire or a young person just beginning to save for retirement, knowing how your savings compare to your generations expectations can be helpful. The Northwestern Mutual study also provides insight into how much high-net-worth individuals think they need to save.