Can one retire at 60 years old with a nest egg of $750,000? According to certified financial planners (CFPs), it's possible but comes with stipulations. These include strong financial planning, moderate spending, and a realistic expectation of retirement costs.
Lifestyle choices play a significant role in determining if this amount is adequate. Living comfortably on an annual $30,000 to $35,000 is feasible with a nest egg of $750,000. However, if plans include regular travel, luxury purchases, or sustain other's expenses, a larger nest egg may be required.
Another crucial challenge is healthcare. Prior to qualifying for Medicare at 65, private insurance or ACA plans can cost between $10,000 to $20,000 annually, making it the most significant unpredictable expense. By actively shopping for healthcare, costs can be mitigated until Medicare eligibility.
The geographic location of retirement can dramatically affect expenses. High-cost cities, such as New York City, San Francisco, and Boston, will require more substantial retirement savings. On the contrary, more affordable and tax-friendly locations can allow for better budget stretching.
Another concern is inflation. Increased living costs can wear away at your savings, necessitating larger withdrawals from retirement savings. To maintain financial health, budgeting adjustments may be required during high inflation periods.
The expected duration of your retirement is critical in determining if $750,000 is enough. The commonly applied 4% rule (withdrawing 4% of the retirement savings annually), is based on a retirement period of 30 years. If you're likely to live longer based on family medical history, additional savings might be needed.
When considering Social Security benefits, most won't be eligible until age 62. The benefits can supplement annual retirement income, but depending on them might not be the best decision. Collecting Social Security early will reduce the monthly benefit, whereas delaying collection increases the benefits by 8% annually.
In summary, retiring early with $750,000 is feasible but depends on factors including age, location, living costs, and early withdrawal of funds. It is crucial to consider healthcare cost, the potential for inflation and the role of Social Security benefits. The 4% rule may be applied, but its efficacy highly depends on your expected retirement duration.