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If you’re 65 years old and gearing up to retire, it’s a good time to assess your savings. The average balance of retirement accounts for Americans aged 65 to 74 was $609,000 in 2022, according to the Federal Reserve’s latest Survey of Consumer Finances.
However, the median balance among this demographic was only $200,000.
With most financial gurus stating that you need millions to retire, is it possible to live comfortably if you only have $500,000 in the bank?
With careful planning it’s possible to make a $500,000 nest egg work. Here’s how.
Set a retirement budget
If you use the classic 4% rule to manage your retirement savings, you’re looking at about $20,000 per year in withdrawals with a $500,000 balance, adjusting for inflation annually. But that’s probably not your only income source available. Chances are, you’re eligible for Social Security at the very least.
The average retired worker on Social Security collects about $23,000 annually. Combined with your savings, you may be able to afford a decent lifestyle if your expenses are relatively low and your home is already paid off (or close to it).
At the same time, it’s important to budget carefully so you’re able to cover your expenses without overdrawing from your savings and putting yourself at risk of running out. To map out your spending and create a strict but realistic plan you may want to consult a financial advisor.
Advisor.com matches you with vetted financial professionals near you. All you have to do is answer a few simple questions about yourself and your financial situation, and Advisor.com will connect you with a fiduciary advisor best suited to assist you.
From there, you can set up a free initial consultation with no obligation to hire to assess whether they’re the right fit.
Prepare for the unexpected
Financial emergencies can arise at any time during retirement, so it’s wise to set aside six to 12 months of expenses in cash so you can cope with unplanned costs.
Keeping your emergency fund accessible at all times can help you avoid taking on debt or liquidating your investments when the market is unfavorable. A high-yield savings account can be your best bet for your emergency fund, as they earn higher returns compared to traditional savings accounts, and are readily available when needed.
You can compare the rates offered on high-yield savings accounts by various banks and financial institutions through SavingsAccounts.com.
Their extensive database shows the most competitive rates, with daily rate updates and personalized recommendations based on your risk preferences and time horizon. Find the right high-yield savings account for you.
Health care expenses can also eat into your savings. Fidelity estimates that the average cost of health care for 65-year-olds who retire today will be $165,000 throughout their golden years.
If you are on the cusp of retirement and are under the age of 65, signing up for health insurance now may mitigate your healthcare expenses down the line.
With U65 Health Insurance, you can compare rates offered by leading insurance providers near you. The process is completely free, and you can get the best quotes within minutes.
Here’s how it works: Enter your zip code and household income, and U65 Health Insurance will show quotes from leading insurance providers like Anthem, Kaiser, Cigna, Oscar Health, and others.
From there, you can review your options and select your preferred coverage before finalizing.
Keep investing in an age-appropriate manner
A $500,000 nest egg can continue to grow in retirement if you invest in a savvy manner. Many retirees are inclined to dump their stocks and shift over to more stable investments, such as bonds, upon retiring. However, it’s a good idea to keep some of your savings in stocks so your portfolio is able to gain value even while you’re withdrawing from it.
One common formula for investing in stocks as a retiree is to subtract your age from 110. If you’re 65, that guidance tells you to keep 45% of your portfolio in stocks, decreasing as you get older.
The nearer you get to your retirement age, the less risk you should be taking. One way to achieve this is to diversify your portfolio outside of stocks and bonds. By including alternative assets such as gold in the mix, your portfolio can remain stable despite market fluctuations.
Gold has long been considered the standard for inflation hedging — helping you ensure the purchasing power of your money doesn’t erode over time.
Opting for a gold IRA gives you the opportunity to hedge against market volatility by allowing you to invest directly in physical precious metals rather than stocks and bonds.
If you’d like to convert an existing IRA into a gold IRA, companies typically offer 100% free rollover. Others might offer free gold, silver or other metals up to a certain amount when you make a qualifying purchase.
You can check out our top picks for industry-leading companies offering gold IRAs.
Compare offers instantly and request a free information guide to help you understand how to diversify your portfolio and secure your retirement fund.
Supplement your savings with earned income
There’s no rule saying you have to stop working completely in retirement. Taking on a part-time job can be a nice way to supplement your savings. And even if you’re collecting Social Security, once you reach your full retirement age, you can earn any amount of income from a job without having any portion of your monthly benefit withheld.
If you don’t like the idea of committing to a part-time work schedule, look at the gig economy. Driving for a ride-hailing service or pet-sitting are things you can do at your own convenience.
You can also get an income without having to take on additional work during your golden years with investments in real estate.
“Whether you are a billionaire or a mom-and-pop property owner, real estate is an outstanding income-producing asset,” said Kevin Chancellor, founder and financial advisor at Black Lab Financial Services.
Arrived can help you get more income in retirement without buying a second property or becoming a landlord.
Backed by world-class investors like Jeff Bezos, Arrived can help you invest in real estate with as little as $100.
Here’s how it works: Browse the curated selection of real estate properties and vacation rentals on Arrived, and select a property you’d like to invest in. Once you have made your selection, review the terms and buy shares within minutes.
The best part? Arrived takes care of homeownership responsibilities such as day-to-day maintenance and finding tenants. You can simply earn returns from the comfort of your home.
Maximize Social Security
Delaying Social Security past full retirement age boosts your monthly benefit by 8% per year, up until age 70.
That could have a big impact on your income if you’re able to wait that long. It would mean dipping more into your savings at first, but the benefit might be worth it in the long run.
While you continue to build your nest egg, consider auto-investing your spare change.
When you make a purchase on your credit or debit card, Acorns automatically rounds up the price to the nearest dollar and places the excess — the coins that would wind up in your pocket if you were paying cash — into a smart investment portfolio.
Let’s say you purchase a doughnut for $2.30. Before you’re done licking the sugar off your fingers, Acorns will round the amount to $3.00 and invest the 70-cent difference for you. Look at this math: $2.50 worth of daily round-ups add up to $900 per year — and that’s before your savings earn money in the market.
Plus, if you sign up now, you can get a $20 bonus investment.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
