Early retirement can mean different things to different people. For one person, it might mean stopping to work at age 55. For someone else, it could mean calling it quits at 48.
Age 60 doesn't constitute a super-young retirement, but it's on the younger side. And it's kind of hard to retire before age 60 due to the sheer fact that you generally can't tap your IRA or 401(k) without penalty prior to age 59 1/2 anyway.
Now, to pull off a retirement at age 60, you may want to make sure you have $1 million saved. The reason? If you exit the workforce at that age, you may be looking at another 20 years, 30 years, or more of paying bills. So you need a decent chunk of cash to avoid financial worries.
The good news is that it's more than possible to retire at 60 with $1 million -- even if you don't start saving and investing money the second you start earning a paycheck.
A surprisingly simple path to $1 million
You'll often hear that retiring with a lot of money requires you to start saving at a very young age. That's a good thing to do, but you're not necessarily doomed if you didn't start funding an IRA the minute you began working full-time. And let's be real -- it's tough to do that in your 20s when you've got bills to pay on an entry-level salary and possibly leftover debt from college.
But let's say you first start saving for retirement at age 30. Believe it or not, you can still get to $1 million by age 60 pretty easily.
All it takes is a $507 monthly contribution to a retirement plan like an IRA or 401(k). But there's another important piece of the puzzle -- choosing the right assets for your investment portfolio.
Over the past 50 years, the stock market, as measured by the performance of the S&P 500 index, has delivered an average annual return of 10%. That return accounts for years of great performance, mediocre performance, and poor performance.
To end up with $1 million after 30 years of making $507 monthly contributions to a retirement plan, your portfolio needs to deliver that same 10% return during your savings window. But if you go heavy on stocks, there's a reasonable chance of scoring that return -- and getting to leave the workforce at age 60 with a cool $1 million to your name.
Of course, you're probably aware that investing in stocks carries some risk. But remember, the 10% return above accounts for plenty of market downturns. If you give yourself a pretty long savings window, you have time to ride out market declines and come out ahead -- and in this context, a 30-year window fits that bill.
How to invest in stocks when you're not sure how
We've covered the numbers -- $507 a month over 30 years could bring you to $1 million if you assemble a portfolio that delivers a 10% yearly return. But what if you don't know much about picking stocks? How are you going to pull off a return that high?
Actually, that's not so hard, either. See, instead of putting your money into individual stocks, what you can do instead is invest in the stock market on a whole by buying shares of an S&P 500 ETF, or exchange-traded fund. This gives you exposure to the 500 largest publicly traded companies.
Remember earlier how we said that the stock market's average return over the past 50 years is 10% annually as measured by the S&P 500 index? Well, investing in that index specifically is a great route to take if you're not comfortable with the idea of hand-picking individual stocks for your portfolio but want the strong returns the broad market has historically produced.
If you're able to research stocks individually, you might manage to score a higher return than what the broad stock market produces. But if you're happy with 10%, then go for an S&P 500 ETF -- especially if you find that easier.
So there you have it. You may not be able to retire with $1 million at age 42 or 53 if you only save somewhere in the ballpark of $500 a month starting at age 30. But a retirement at age 60 with $1 million to your name is more than doable even if you don't start funding your IRA or 401(k) the second you start working.
FAQs
Saving and investing $507 a month over 30 years could get you to $1 million. If you begin consistently funding an IRA at age 30, you could be ready to retire by age 60. For this formula to work, you need a stock-heavy portfolio that produces strong returns.
Is $1 million enough to retire 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. So deciding to retire at 60 calls for careful planning around healthcare, taxes and more.
How much money is needed to retire at age 60? ›
By age 35, aim to save one to one-and-a-half times your current salary for retirement. By age 50, that goal is three-and-a-half to six times your salary. By age 60, your retirement savings goal may be six to 11-times your salary. Ranges increase with age to account for a wide variety of incomes and situations.
Can you retire on $1 million here's how far it will go? ›
For example, if you have retirement savings of $1 million, the 4% rule says that you can safely withdraw $40,000 per year during the first year — increasing this number for inflation each subsequent year — without running out of money within the next 30 years.
How much would I need to save monthly to have $1 million when I retire instructions? ›
Starting to Save at Ages 45-50
To become a millionaire by age 65, you'd need to save $3,000 each month. For many, this may not be realistic, but try to get as close to this number as you can. If you begin saving five years earlier, at age 45, you'll have a little more flexibility, but your budget will still be tight.
Can I retire at 60 with 1m? ›
To most people, one million pounds is a very significant amount of money. On the face of it, this sounds like enough money to live on in retirement. But once you start factoring in a long life and high spending, this can quickly dwindle. The key takeaway is that you must decide how you want your retirement to look.
Can you retire at 62 with 1.5 million dollars? ›
Monthly Income From $1.5 Million Retirement Fund
If you retire at 62 with $1.5 million saved, applying the 4% rule suggests an annual withdrawal of $60,000 or about $5,000 per month. This rule assumes an annual withdrawal rate of 4%, adjusted for inflation, to sustain your savings for 30 years or more.
What is a good 401k balance at age 60? ›
Fidelity says by age 60 you should have eight times your current salary saved up. So, if you're earning $100,000 by then, your 401(k) balance should be $800,000.
How much does the average American have in retirement at age 60? ›
Federal Reserve SCF data
| Age Range | Median Retirement Savings |
|---|
| Ages 45-54 | $115,000 |
| Ages 55-64 | $185,000 |
| Ages 65-74 | $200,000 |
| Ages 75+ | $130,000 |
2 more rowsAs of June, there were roughly 497,000 so-called retirement-created millionaires in the U.S., according to the wealth management firm, which analyzed balances across 26,000 of its customers' accounts. Nearly 399,000 Americans also have a least $1 million in an individual retirement account.
What are the average and median retirement savings? The average retirement savings for all families is $333,940, according to the 2022 Survey of Consumer Finances. The median retirement savings for all families is $87,000.
How many people have $3000000 in savings in the USA? ›
There are estimated to be a little over 8 million households in the US with a net worth of $3 million or more.
Can you live off interest of $1 million dollars? ›
Once you have $1 million in assets, you can look seriously at living entirely off the returns of a portfolio. After all, the S&P 500 alone averages 10% returns per year. Setting aside taxes and down-year investment portfolio management, a $1 million index fund could provide $100,000 annually.
Can I retire at 60 with $1 million dollars? ›
It's definitely possible, but there are several factors to consider—including cost of living, the taxes you'll owe on your withdrawals, and how you want to live in retirement—when thinking about how much money you'll need to retire in the future.
How much do I need to retire at 60? ›
Someone between the ages of 51 and 55 should have 5.3 times their current salary saved for retirement. Someone between the ages of 56 and 60 should have 6.9 times their current salary saved for retirement. Someone between the ages of 61 and 64 should have 8.5 times their current salary saved for retirement.
How many Americans have $1,000,000 in retirement savings? ›
As of June, there were roughly 497,000 so-called retirement-created millionaires in the U.S., according to the wealth management firm, which analyzed balances across 26,000 of its customers' accounts. Nearly 399,000 Americans also have a least $1 million in an individual retirement account.
Can I retire at 60 with $3000000? ›
Yes, retiring early with $3 million is possible. If you plan to retire at 55, you will have to account for 11 additional years of expenses and 11 fewer years of income compared to retiring at 66. However, with careful planning, $3 million can provide a comfortable retirement starting at 55. 4.
What percentage of retirees have $2 million dollars? ›
And if you're aiming for the $2 million club? Well, the number of those who make it is even smaller. We're talking about a sliver of a sliver – somewhere between that 3.2% and the razor-thin 0.1% who've got $5 million or more.
