Can You Retire at 62 With $400,000 in a 401(k)? (2024)

Can You Retire at 62 With $400,000 in a 401(k)? (1)

You can retire a little early on $400,000, but it won’t be easy.If you have the option of working and saving for a few more years, it will give you a significantly more comfortable retirement. By waiting until at least age 67, you can collect more in lifetime Social Security benefits and your retirement account will have gathered quite a bit more steam.But if there’s a good reason to retire early and if you can live very modestly, you might make these numbers work. Here’s what you need to know. You can also work with a financial advisor if you’re wanting a more personal look at what you need to retire.

Social Security and Medicare at 62

At 62 you can take withdrawals from your retirement accounts, such as a 401(k), without incurring a special tax penalty. At the time of writing, the IRS allows you to withdraw money from tax-advantaged accounts starting at age 59.5, so you can take full drawdowns. However, age 62 is still considered early retirement. Your savings will have to last longer and will have less time to grow if you start taking them out at 62.

Age 62 is also when you can begin collecting Social Security benefits. However, Social Security works sliding scale. The full retirement age is officially 67. If you retire early, the government reduces your lifetime monthly benefits proportionally. If you retire later, up to age 70, the government increases those benefits.

By retiring at age 62, the earliest you can begin collecting Social Security, you will reduce your lifetime benefits by 30%. This means that for every $1,000 in benefits that you would receive at full retirement age, you will receive $700 instead. At age 67, the average Social Security benefit per month is $1,866, so if you retire at age 62 average benefits will pay $1,306 per month.

Finally, Medicare will not kick in until age 65. This means that, in addition to any supplemental health insurance to cover the gaps in Medicare itself, you will need full health insurance to bridge the time between your employer’s coverage and Medicare coverage.


In addition to Social Security benefits, the key question is how much you can reliably earn from your total retirement plan. With $400,000 in your 401(k), how much can you expect to draw down from that portfolio? Will it be enough to last throughout retirement starting at age 62?

The answer is, maybe. This money can generate a modest income that might be enough to pay your bills depending on your standard of living. But this will not be a generous income. It won’t leave you much room for either luxury or emergency spending.

To see how this works, let’s start with the average Social Security income adjusted for early withdrawals, which is just shy of $16,000 per year. Now, consider annual withdrawals from four separate portfolios: cash, bonds, stocks and annuities.

Note that this is simplified for the sake of demonstration. A standard retirement portfolio will typically hold a mix of assets weighted toward safe investments but with some long-term growth assets as well.


A cash portfolio means that you keep your investments in banking products like savings accounts and certificates of deposit. Generally speaking, at best these products will keep your portfolio consistent with inflation and usually not even then. We can treat this as effectively a 0% rate of return.Keeping your money in cash is not really an option here.

Using the standard 4% withdrawal rule, this would let us pull $16,000 per year from the retirement account. Combined with Social Security, this would give you almost $32,000 per year in pre-tax income. This isn’t much to live on and it would only last you about 25 years before your portfolio runs out. Starting at age 87, you will need to coast on $16,000 per year in Social Security benefits for the rest of your life.


For the last 20 years, bond yields have hovered around 4%.Using this as a benchmark, a $400,000 portfolio invested entirely in bonds would generate $16,000 per year without touching the underlying principal. While you would need to ensure a portfolio of bonds that actually do pay that kind of interest rate, this could ensure a functionally indefinite retirement at almost $32,000 per year when combined with Social Security benefits, somewhat adjusted for inflation as Social Security benefits increase.

But… that’s still not a lot of money. And unfortunately drawing down on your principal will only help a little.Remember, by retiring at age 62 you are setting up for a long retirement. This money will need to last around 40 years to comfortably ensure that you won’t outlive your savings. This means you can probably boost your total withdrawals (principal and yield) to around $20,000 per year.This will give you a pre-tax income of almost $36,000 per year.


When discussing retirement accounts, stocks can be tempting and dangerous.Historically the average annual return on the S&P 500 is a little over 10%.That’s why market-indexed funds are such a powerful tool for people saving up for their retirement. In retirement, this can be just as valuable. With a $400,000 retirement account, a 10% annual rate of return would give you $40,000 per year without ever drawing down on the principal.

You’d have to manage the fund, selling and buying assets to capture those gains, but combined with Social Security benefits this would give you a $55,000 per year indefinite income. You wouldn’t be rich, but that’s enough to be comfortable in many places. The problem is volatility. That 10% rate of return is the average rate of return in a highly unpredictable market.Some years you will receive much more, some years much less. In bad years you will even lose money.

Building a retirement strategy around stocks means managing that volatility. If you have the capacity to set aside money in good years to offset the losses in bad ones, then this approach might work. If not, you might find yourself riding out a recession with almost $16,000 per year in Social Security benefits to avoid taking losses.

Lifetime Annuities

Lifetime annuities aim for the middle ground between stocks and bonds. This is a contract in which you provide an up-front investment and then the company (typically a life insurance company) guarantees you a fixed payment for the rest of your life. The contract typically pays more than bonds, but less than stocks and offers long-term security.

The earlier you invest in an annuity, the more it will pay over the long run. However, a popular approach is to invest in stocks and other growth assets while saving up, then convert your portfolio into an annuity upon retirement.

With $400,000, if you buy an annuity at age 62 and then retire, you might expect monthly payments of around $2,400 for the rest of your life. This comes to about $28,800 per year in guaranteed income according to one estimate. That’s better than bonds, but less than stocks and combined with Social Security you could expect about $44,800 per year in pretax income.

This isn’t much, but in most of the country, you can afford a modestly comfortable lifestyle with this amount of money. More importantly, you will not have to draw down on any principal. Short of the insurer collapsing with no bailout or rescue, which is unlikely, you can expect these payments to continue indefinitely. Of the options we discuss here, it is probably your best bet.

Retiring at 62 on $400,000

Can You Retire at 62 With $400,000 in a 401(k)? (2)

This plan can work … sort of. At age 62, with $400,000 in a 401(k) account, you can generate a livable income depending on how you structure your portfolio and where you choose to live.

Livable does not mean comfortable, however. This approach will not leave you much room for comfort or luxury and you might have a real problem in case of emergencies or unexpected expenses. What’s more, with this profile, you’re only a few years away from a quite comfortable retirement if you can wait just a little longer.

Say that you wait until full retirement age at 67. Invested in an S&P 500 index fund, that extra five years of investing could let your portfolio grow to more than $644,000.That could buy you a $46,000 per year annuity. Add in full Social Security benefits, averaging $22,400 per year and you can retire on more than $68,000 in annual, indefinite income.

This portfolio will allow you a tight, but possible, retirement at age 62. But it will allow you a comfortable retirement if you can hold on for just five more years.

Bottom Line

Can You Retire at 62 With $400,000 in a 401(k)? (3)

If you have $400,000 in the bank you can retire early at age 62, but it will be tight. The good news is that if you can keep working for just five more years, you are on track for a potentially quite comfortable retirement by full retirement age.

Social Security Tips

  • How you invest during your retirement really does matter. After all, these days you will likely spend several decades enjoying your life after work. That’s a lot of time for your money to grow if you can manage it well.
  • A financial advisor can help you build a comprehensive retirement plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three 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.

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Can You Retire at 62 With $400,000 in a 401(k)? (2024)


Can You Retire at 62 With $400,000 in a 401(k)? ›

If you have $400,000 in the bank you can retire early at age 62, but it will be tight. The good news is that if you can keep working for just five more years, you are on track for a potentially quite comfortable retirement by full retirement age.

How much in 401k to retire at 62? ›

By retirement age, it should be 10 to 12 times your income at that time to be reasonably confident that you'll have enough funds. Seamless transition — roughly 80% of your pre-retirement income. This amount is based on a safe withdrawal rate (SWR) of about 4% of your retirement accounts each year.

How long can I live on $400,000 last in retirement? ›

Safe Withdrawal Rate

Using our portfolio of $400,000 and the 4% withdrawal rate, you could withdraw $16,000 annually from your retirement accounts and expect your money to last for at least 30 years. If, say, your Social Security checks are $2,000 monthly, you'd have a combined annual income in retirement of $40,000.

What is the average 401k balance for a 62 year old? ›

Average and median 401(k) balances by age
Age rangeAverage balanceMedian balance
2 more rows
Mar 13, 2024

Is $500,000 enough to retire on at 62? ›

Most people in the U.S. retire with less than $1 million. $500,000 is a healthy nest egg to supplement Social Security and other income sources. Assuming a 4% withdrawal rate, $500,000 could provide $20,000/year of inflation-adjusted income. The 4% “rule” is oversimplified, and you will likely spend differently.

Can I retire at 62 with $400,000 in my 401k? ›

If you have $400,000 in the bank you can retire early at age 62, but it will be tight. The good news is that if you can keep working for just five more years, you are on track for a potentially quite comfortable retirement by full retirement age.

Is $3,000,000 enough to retire at 62? ›

Summary. $3 million should be more than enough to fund your retirement, even if you choose to retire early. A number of factors are at play when determining how long $3 million will last, including your investment strategy and retirement lifestyle.

What's a good monthly retirement income? ›

Average Monthly Retirement Income

According to data from the BLS, average 2022 incomes after taxes were as follows for older households: 65-74 years: $63,187 per year or $5,266 per month. 75 and older: $47,928 per year or $3,994 per month.

What is a comfortable retirement income? ›

Roughly speaking, a single person will need to be able to spend about £14k a year to achieve the minimum living standard, £31k a year for moderate, and £43k a year for comfortable.

What is a reasonable amount to live on in retirement? ›

After analyzing many scenarios, we found that 75% is a good starting point to consider for your income replacement rate. This means that if you make $100,000 shortly before retirement, you can start to plan using the ballpark expectation that you'll need about $75,000 a year to live on in retirement.

Should I cash out my 401k at 62? ›

The bottom line. There are several ways you can withdraw from your 401(k) or IRA penalty free. Still, we recommend not touching your retirement savings until you are retired. Compounding can have a significant impact on helping to maximize your retirement savings and extending the life of your portfolio.

What should my net worth be at 62? ›

Average net worth by age
AgeAverage net worth
2 more rows
Feb 23, 2024

How much does a 62 year old need to retire? ›

Average retirement savings by age
AgeAverage retirement savings (2022)Median retirement savings (2022)
45 to 55$313,220$115,000
55 to 64$537,560$185,000
65 to 74$609,230$200,000
75 or older$462,410$130,000
2 more rows
Dec 21, 2023

How long will $400,000 last in retirement? ›

Using the standard 4% withdrawal rule, this would let us pull $16,000 per year from the retirement account. Combined with Social Security, this would give you almost $32,000 per year in pre-tax income. This isn't much to live on and it would only last you about 25 years before your portfolio runs out.

How to retire at 60 with no money? ›

If you retire with no money, you'll have to consider ways to create income to pay your living expenses. That might include applying for Social Security retirement benefits, getting a reverse mortgage if you own a home, or starting a side hustle or part-time job to generate a steady paycheck.

How long will $750,000 last in retirement at 62? ›

Drawdown and Spending

The money might last 25 years. Under the 4% method, investment advisors suggest that you plan on drawing down 4% of your retirement account each year. With a $750,000 portfolio, that would give you $30,000 per year in income.

How much does the average person need to retire at 62? ›

While the average retirement age is 61, some Americans choose to retire at 62. You need to save less than $1 million to retire at this age. The average American can't afford to retire at 62 comfortably. A financial advisor can help you plan your dream retirement and create a financial plan to get you there.

Can I retire at 62 with $100,000? ›

“With a nest egg of $100,000, that would only cover two years of expenses without considering any additional income sources like Social Security,” Ross explained. “So, while it's not impossible, it would likely require a very frugal lifestyle and additional income streams to be comfortable.”

Is $1 million enough to retire at 62? ›

Around the U.S., a $1 million nest egg can cover an average of 18.9 years worth of living expenses, GoBankingRates found. But where you retire can have a profound impact on how far your money goes, ranging from as a little as 10 years in Hawaii to more than than 20 years in more than a dozen states.

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