My Wife and I Have $1 Million in a 401(k) and Fully Own a $500k Home. Can I Retire in 5 Years at 60?

With $1 million in a 401(k) and no mortgage on a $500,000 home, retirement at 60 may in fact be possible. However, retiring before eligibility for Social Security and Medicare mean relying more on savings. Deciding to retire at 60 calls for careful planning around healthcare, taxes and more. At any age, deciding whether you can retire comes down to weighing your assets against your expenses.

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Retirement Decision Basics

The first step in deciding if you can retire at 60 is understanding your financial situation. Important factors include your assets like retirement accounts, other savings and home equity. Your expenses also matter, from basics like housing and food to discretionary costs for travel. Comparing your income sources to your costs reveals whether you need to adjust your savings rate or can retire comfortably.

It’s also key to understand how retirement age affects your future income and expenses. For instance, you aren’t eligible for Social Security until age 62. Also, while you can technically claim benefits at 62, waiting until your full retirement age of 67 or delaying until 70, boosts your monthly benefit significantly.

Retirement age also can greatly affect healthcare costs. That’s because retiring before 65 means paying for additional years of private health insurance until Medicare eligibility.

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Retiring By 60

American workers typically retire around ages 62 and 65. According to the Center for Retirement Research at Boston College, the average retirement ages for men and women in 2025 were 64.6 and 62.6, respectively. ¹ Retiring early at 60 requires diligent preparation, but isn’t impossible. First, understand the rules around retirement accounts.

With a 401(k), you can take penalty-free withdrawals starting at age 55 if you leave your employer. However, you’ll still owe income tax on withdrawals. It’s wise to delay drawing down retirement savings as long as possible, so your investments keep growing.

Second, realize you’ll need to self-fund healthcare until Medicare at 65. In turn, you’ll need to budget for five years of individual coverage or COBRA. If you have health issues, delaying retirement to keep work-based insurance may be safest.

Third, while you can claim Social Security at 62, your benefit will be permanently reduced versus waiting. For someone whose full retirement age is 67, claiming at 62 reduces the retirement benefit by 30%, while delaying benefits until age 70 increases the full-retirement-age benefit by 24%. If you can afford to wait, many experts recommend doing so.

If you have a mortgage, consider paying it off before retiring at 60. If you’ve paid off your home, that’s one less expense to worry about after you’re living on a fixed income, notes Alec F. Root, a Chartered Financial Analyst (CFA) at DBR & CO in Pittsburgh.

“Generally speaking, it is not imperative to pay off your mortgage in full before retirement, but it does make a difference,” Root told SmartAsset. “The primary reason is that if you own your home outright, then you are eliminating an annual expense of $30,000 to 40,000 or more during retirement. Without this expense, there is less need to draw from your assets and/or income sources, which helps preserve your assets over the duration of your retirement.”

Retiring at 60 in Action

A hypothetical example can show how all this might work. Consider a married couple, both 55 years old, with $1 million in 401(k) accounts and a paid-off $500,000 home. They make $150,000 a year combined and spend $80,000 annually. They have 10 years until age 65 and Medicare eligibility, but would like to retire by age 60.

The first thing the couple would need to do is calculate how much their portfolio could be worth in five years at age 60 and hoping to retire. If their savings grew at a modest 5% per year, their $1 million portfolio would be worth approximately $1.28 million (assuming no additional contributions).

Using a 3.9% starting withdrawal rate, based on recent research for retirees seeking consistent inflation-adjusted spending over a 30-year period, the couple’s $1.28 million 401(k) could provide approximately $50,000 in income in their first year of retirement. They could cover the resulting $30,000 shortfall by increasing their withdrawal rate to around 6.25%. This would, however, increase the chances they’d run out of money in retirement.

Two years after retirement, at age 62, they could claim Social Security benefits. As a reference point, the average monthly benefit for retired workers age 62 was about $1,424 at the end of 2025. ² If they each received that amount, their combined annual Social Security benefit would be about $34,176. Actual benefits would depend on each spouse’s earnings record and claiming age. They could then reduce the amount they need to withdraw from their 401(k).

They’d need to budget carefully for healthcare, likely buying an individual policy costing $1,000 per month for them both until Medicare eligibility at 65. Taxes will also take part of their income from withdrawals and Social Security, but early retirement appears feasible with their assets. They could also trim spending or earn income from part-time work.

See if your retirement savings is on track for you to retire by the time you hit 60 years of age:

Making the Call

EveEvery individual retirement plan is different. Strategies for deciding if you can plan to retire early include:

• Calculate your target income, likely 60% to 80% of current earnings
• Project your Social Security benefits if you claim at 62, or wait until full retirement age or later
• Use retirement calculators to model portfolio returns.
• Get quotes on individual health insurance to estimate pre-Medicare costs.
• Consider downsizing or relocating to a lower-cost city to reduce spending.
• Pay off debts, especially high-interest credit cards, before retiring.

No matter how well laid out your early retirement plan is, risks remain. For instance, retirement costs may exceed projections due to inflation or healthcare needs. Another possibility is that an extended period of underperformance could jeopardize portfolio sustainability. Surprise costs, such as unexpected home repairs, can strain budgets, Root notes.

“Some of the major costs to budget for after paying off a home include general maintenance and repairs, larger projects such as a new roof or new floors, or a bathroom or kitchen renovation, and property taxes,” he said.

Bottom Line

Retiring at 60 takes careful preparation, but it’s possible for those who plan ahead. That means understanding your income sources, estimating expenses accurately and preparing for risks such as health care costs before Medicare begins at 65. Paying off your mortgage before you retire can also lower the income you’ll need.

“One of the biggest investment risks for soon-to-be-retirees is sequence of return risk, which is the series of poor investment returns early in your retirement. This can cripple your financial health, so it’s imperative that you have safe places to pull money during years of poor stock market returns,” said Matthew Hofacre, MSPFP, CFP®, EA.

Matthew Hofacre, MSPFP, CFP®, EA provided the quote used in this article. Please note that Matthew is not a participant in SmartAsset AMP, is not an employee of SmartAsset and has been compensated. The opinion voiced in the quote is for general information only and is not intended to provide specific advice or recommendations.

Retirement Planning Tips

• A financial advisor can help you build a retirement plan for the future. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Use SmartAsset’s retirement calculator to see how retirement-ready you are. Try it today.

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