But while it’s one thing to retire in your late 60s with $490,000, it’s another thing to retire at age 62 with that sum of money to your name. Age 62 is still considered fairly young in the context of retirement. According to a Gallup survey, 66 was the average expected retirement age in 2022. So if you retire at age 62 but end up living a very long life – which is something you should hope for – you run the risk of depleting your nest egg.
That said, with proper planning, it’s possible to make $490,000 last throughout retirement. But you’ll need to be mindful of the lifestyle that’s likely to lead to, and you may want to make some adjustments to your spending habits to avoid financial stress.
The problem with retiring on $490,000 at age 62
In a Northwestern Mutual study released earlier this year, Americans across all age groups said they expected to need $1.46 million to retire comfortably. If you have $490,000 in savings, you’re only about one-third of the way there.
Of course, just because one survey found that $1.46 million seems to be the magic retirement number doesn’t mean that’s the amount you need. You may have plans to live a fairly modest lifestyle in retirement, which would make it easier to get away with having less savings.
But there’s another issue with retiring at age 62 on $490,000, and it’s that you haven’t reached full retirement age for Social Security purposes. Full retirement age is when you’re eligible for your complete monthly benefit based on your personal income history without a reduction.
If you're 62 years old and were born in 1962, your full retirement age is 67. Filing for Social Security as soon as you retire means slashing your monthly benefit by as much as 30% for life. And while you could certainly wait until age 67 to claim Social Security, in that scenario, you risk spending too large a portion of your limited savings too quickly. So all told, it’s a tricky situation.
How to pull off your retirement plans
While retiring at 62 with $490,000 in savings may not be the easiest thing, it can be done. But to make sure it’s a smart move, you’ll need to figure out how much monthly income you’ll have and what your expenses look like. Sticking to a budget will be crucial, since your income will be limited.
If you use the 4% rule to manage your $490,000 nest egg, you’re getting about $19,600 per year, or $1,633 per month, to spend for 30 years. This assumes you’ve invested your retirement savings in a balanced portfolio.
