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I’m 58 years old, single and have $970,000 stashed in my 401(k) — can I retire today?
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You’ve hit your late 50s, you’ve got a nice cushion in your 401(k) and suddenly you find yourself wondering if that cushion will provide you with enough comfort to retire today.
The promising news is that yes, you may be able to retire today at 58 years old with $970,000 in your 401(k). But you’ve got enough life experience now to know there’s always a bit more nuance than that.
Retiring earlier means you’ll need to wait several years before you can start claiming Social Security benefits and be eligible for Medicare. And it means needing a solid plan on your retirement expenses, health care and even taxes.
Don’t have that all set in stone? Then you may have to delay retirement.
Here’s what to consider before handing in your notice.
Deciding if it’s possible for you to retire will depend on whether you have a clear idea of how you’ll cover your expenses if you stop working. Since you can’t claim Social Security benefits just yet, the $970,000 in your 401(k) needs to be truly enough to cover all of your expenses until you can.
Many retirees use a common retirement budgeting tactic, the 4% rule, to ensure there’s enough money from their retirement accounts when making withdrawals, even when adjusted for inflation. With $970,000 in a 401(k), you can typically withdraw $38,800 each year before taxes. Of course, your retirement income may be higher if you have more assets held in other retirement accounts.
A financial advisor can help you break down your total expenses and determine how much you need to withdraw each month to sustain your lifestyle. According to Vanguard research, people who consult with financial advisors see a 3% increase in net returns than those who don’t.
Advisor.com can help you connect with a vetted financial advisor near you for free. The online platform combs through its database of thousands to match you with an SEC/FINRA-certified expert best suited to your needs.
You can read through their profile and client reviews and set up a free introductory call with your matched advisor with no obligation to hire to see if they’re the best fit for you.
Evaluating your fixed expenses also plays a huge role in retirement planning, especially if you have high debt.
Still want to retire early? Here’s where getting crystal clear comes in handy: if you’re not clear on your income and expenses, now and years in the future, you could be at risk of running out of money.
As in, it’s still possible to make it work if you’re willing to get creative with how you can afford it.
If you want to make early retirement work for you with less than a million in the bank, you’ll have to cut down on your expenses. One area where you might be able to cut down costs is auto insurance.
Car insurance premiums rose by 16.50% on average in 2024, and are expected to rise further by 7.50% in 2025, according to a report published by ValuePengiun.
This doesn’t mean you can’t reduce your monthly premiums. Research shows that shopping around for car insurance rates can help you save nearly $400 a year.
OfficialCarInsurance is an online marketplace that lets you compare auto insurance rates offered by leading providers like GEICO, Allstate, and Progressive, and others. You can customize your search by entering the make and model of your car, driving history, and zip code — helping you find the lowest rate possible.
The best part? The process is 100% free and won’t impact your credit score.
Read more: Here are the 7 top habits of ‘quietly wealthy’ Americans — how many do you follow?
Say you estimate your retirement expenses will be $50,000 each year and your only income source is your 401(k) until you decide to claim Social Security benefits when you’re 65. In this case, you’ll need to cover around a $12,000 shortfall (it’ll depend on how much you need to pay in taxes) for the next seven years.
Instead of leaving your career entirely, see if you can work part-time hours or freelance for your current employer. Side hustles or gig work is another way to fill in any income gaps. Your skills may easily lend themselves to a side business idea. That way, you can free up some time to pursue your ideal retirement lifestyle while earning income.
If you wish to retire completely, try to build a passive income source to ensure you can cover any shortfall.
Investing your cash in a high-yield savings account or high-yield certificate of deposit (CD) can be an excellent way to put your savings to use. High-yield savings accounts and CDs typically have low risk and offer higher returns compared to a traditional savings account.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
