Can You Retire on $500,000?

Planning for retirement is a numbers game, and ,many experts recommend saving at least $1 million to live comfortably.  That figure doesn’t take your individual goals, needs or spending habits into account and you may be able to retire on much less.  IFor example, half that number could be plenty for your situation. But can you retire on $500,000? Read on to learn whether it’s a realistic goal. If you don’t know where to start with planning for retirement, consider working with a financial advisor who can guide you toward the right strategy to turn that vision into reality.

What Does the Typical Retirement Cost?

According to the Bureau of Labor Statistics,¹ the average person who’s 65 and older spent $60,359 in 2022. That means over a 25-year retirement, a person who spends $60,359 in their first year of retirement would spend approximately $2 million in total (assuming they increase their spending by 2.5% per year to account for inflation). So the $1 million savings mark likely wouldn’t cut it. Though, the costs will vary quite a bit based on what state you live in.

A big chunk of that spending is related to healthcare. According to Fidelity Investments², the average 65-year-old person who retired in 2025 can expect to spend approximately $172,500 on medical expenses over the rest of their life. That figure doesn’t include long-term care costs for retirees who require assisted living services or in-home healthcare. Insurance firm Genworth³ estimates the annual cost of a private room in a nursing home to cost nearly $127,0750 in 2025.

While Medicaid can cover long-term care expenses, Medicare does not. And qualifying for Medicaid may require retirees to spend down their retirement assets to become income-eligible. Social Security benefits can help supplement retirement savings but they will only go so far. For 2025, the maximum Social Security benefit is $5,108, up from $4,873 in 2024.

Crunching the numbers, the idea of retiring on $500,000 may seem out of reach. But don’t count it out completely. You’ll just need to estimate accurately and manage your living expenses, both before and after retirement, to make it happen.

How to Retire on $500,000

Creating a mock-up retirement budget can reveal if your $500,000 target is realistic based on the type of lifestyle you plan to enjoy. The budget should account for basic living expenses including housing, food, utilities and transportation, as well as healthcare, hobbies and travel. If you have no idea where to begin, review your current spending patterns.

Try tracking your spending for at least six months and then ask yourself some key questions, such as:

• Is what you’re spending now likely similar to what you’ll spend in retirement?
• Are there any expenses you have now that may increase or decrease when you retire? Any that could disappear altogether?
• Are there expense categories you don’t have now that you might add to your budget when you retire?

These questions will provide insight into what it will cost to maintain your standard of living in retirement and help you decide on a realistic draw-down rate. Typically, experts recommend withdrawing 4% of your retirement assets – or less – each year (and adjusting withdrawal amounts for inflation yearly) to ensure the money lasts. Assuming you have $500,000 in retirement, you could realistically withdraw $20,000 in your first year of retirement. That amount would shrink incrementally each subsequent year, assuming zero portfolio growth.

If you take that $20,000 and add in the most recent average monthly Social Security benefit⁴ of $1,952, that brings your total annual income up to around $43,424. That’s assuming, however, that you wait until your full retirement age to claim Social Security benefits. Taking Social Security at age 62 would reduce your benefit amount, while progressively delaying benefits until age 70 would increase your payout.

Consider Where You Want and Can Afford to Retire

If your estimated retirement budget exceeds your expected retirement income, you may consider relocating to a smaller space or more affordable area to reduce expenses. When evaluating budget-friendly retirement spots, consider:

• Median housing costs
• Cost of renting vs. buying
• Median healthcare costs
• Access to healthcare
• Crime rate
• Recreation and amenities
• Location, weather and climate

Living in a small beach town, for instance, could save you money but it may create headaches if it’s in an area that’s prone to hurricanes. A city might have stellar access to healthcare but very little in the way of things to do or opportunities to connect with other retirees.

Alternatively, you might look into retiring aboard a cruise ship or heading overseas. Malaysia, Panama, Georgia and Slovenia consistently rank among the cheapest places to retire, while enabling you to soak up a new culture. But if you’re planning an overseas retirement, be sure to do your research.

In addition to considering the cost of living, check any legal requirements for establishing residency in your chosen country. Weigh your options for healthcare and look into potential tax implications associated with claiming Social Security benefits or withdrawing money from investment accounts from afar.

Save for Retirement Early and Often 

The most important thing you can do if aiming to retire on $500,000 is to be proactive about saving and investing. The sooner you start, the longer you have to take advantage of compound interest.

An employer retirement account, like a 401(k), can offer an easy entry point to saving. lAt a minimum, it’s a good idea to contribute enough to get a full company match, which is essentially free money.Try to increase your savings to the annual contribution limit.

For 2025, you can contribute up to:

• $23,500 if you’re under 50 years of age, PLUS
• $7,500 in catch-up contributions if you’re 50 or older, OR
• $11,250 if you’re between the ages of 60 and 63

Depending on your age, your maximum 401(k) contribution for the year would be $23,500, $31,000 or $34,750 if you’re in the age group that’s eligible for a super catch-up contribution. 

Review your contribution rate annually to assess whether you might be able to increase it by a percentage point of two. Experts generally recommend that you contribute 10% to 15% of your income if you’re on track to retire by 65. 

Look Beyond Your Workplace Plan

If you’re able to max out your employer’s plan, you can supplement your retirement savings with a traditional or Roth IRA. 

• Traditional IRAs allow for tax-deductible contributions, though you’ll owe taxes on withdrawals in retirement. 
• A Roth IRA affords tax-free withdrawals in retirement since you’ll pay your taxes upfront when you make contributions

For 2025, the regular contribution limit to either type of IRA is $7,000, plus an additional $1,000 catch-up contribution limit for savers 50 and older. 

A health savings account (HSA) can help you prepare for future healthcare expenses on a tax-advantaged basis. These accounts, traditionally associated with high-deductible health plans, allow you to deduct contributions, up to the annual limit. Contribution limits⁵ are determined by your coverage type. 

For the 2025 tax year:

• Individuals can contribute up to $4,300 
• Families can contribute up to $8,550

These contributions grow tax-deferred and withdrawals are tax-free when used for qualified healthcare expenses. At age 65, you can begin taking funds from an HSA penalty-free for any reason. You’ll pay income tax on the distributions.

Trump’s tax plan, otherwise known as the One Big Beautiful Bill Act, expanded eligibility for HSAs. Beginning January 1, 2026, eligibility will include individuals who:

• Are covered under a direct primary care service arrangement
• Receive telehealth and remote care services before meeting the deductible
• Are enrolled in a bronze or catastrophic health plan offered through the insurance marketplace

The OBBB does not affect eligibility, contribution and withdrawal rules for 401(ks) and other tax-advantaged retirement plans. 

Finally, take advantage of unexpected savings opportunities as well. If you get a raise, for example, divert those extra funds to your 401(k) or IRA. Do the same with tax refunds, bonuses and any other windfalls you receive. Those extra funds can add up over time, getting you closer to your $500,000 retirement savings goal. If you’re lucky, you might even surpass that amount.

Bottom Line

Can you retire on $500,000? It may be possible, but it probably won’t be easy. It may take aggressive saving, strategic investing and some thoughtfulness regarding your desired lifestyle and needs.  Paying down debt, reducing housing expenses and maintaining good health can make your dollars stretch further. And remember that professional advice typically goes a long way when it comes to long-term planning.

Tips for Planning Your Retirement

• Some financial advisors specialize in helping clients plan for retirement. 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.
• Wondering if you’re saving enough for retirement? Consider using a retirement calculator.

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