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Can you retire at 60 with £500k?

For many of us, retirement can’t come soon enough. The promise of caravanning holidays and afternoon naps sounds like a dream come true. But whatever your plans might be, it can be quite difficult to figure out how much money you need when the time comes. Let’s take a look to see if you really can retire at 60 with £500,000 in the bank.

Can you retire at 60 with £500k?
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The sad fact is, that finishing work at 60 is now considered as an early retirement. Thanks to changes by the UK government and an increase in life expectancy, 68 (or 66 and 67 in some cases) is now considered the full retirement age, which is when can take your state pension. But if you have some money put away, would it be possible to retire a little earlier? What amount of money would you need to retire at 60?

Let’s take a look to see if £500k is enough money to see you through your twilight years.

Can You Retire At 60 with £500k?

It depends, is the simple answer. In retirement, how much you need will mainly depend upon your lifestyle and circumstances (more on that below). If you consider yourself a particularly frugal person, then £500k will go much further. You’ll also have far more spare income if you own your home. And lastly, it will depend on what you do with your half a million pounds and what kind of monthly income it will bring you.

How to reach that £500k pot

Half a million pounds might sound like a lot of money, but it’s certainly a reachable retirement savings goal, especially if you start a retirement plan early. If you don’t have a large annual salary, it might be a good idea to take on a few side hustles which can help you to make extra money. The more sources of income you have, the better.

You may consider starting an investment portfolio. Investing, in the long-term, tends to give you far better returns than compared to a regular savings account and is a good passive income. Any money you make can be immediately reinvested.

And as much as we don’t like to talk about it, it’s worth factoring in a possible inheritance from family members. Sadly, it’s not unusual for people in their 50s and early 60s to receive a lump sum from a recently deceased close relative.

How to make your money last longer

Of course, once you reach your first year of retirement, you’ll need to do something with your £500,000 if you want a healthy retirement. The more you earn, the longer you can have a comfortable retirement.

Placed into a high-street savings account, the interest will be in the region of 0.25%, which would be about £1,250 per year. There are fixed savings accounts available that pay around 1% plus and will tie up your savings for anywhere between 1-5 years. At 1% in interest, that equates to £5,000 per year.

If you’re looking for potentially greater returns, then you might want to continue to invest if you’re already doing so. According to Nerd Wallet, the average stock market return has been around 10% over the last century. That would earn you £50,000 per year (not including income tax). If you did make that kind of money, you would have complete financial independence. All of your living expenses would be covered and you would never have to touch that £500,000.

But before you throw all of your money into shares, you need to know that investing should be made with the long term in mind and the value of your investment can go down, as well as up. A couple of bad years could see your nest egg take quite a beating. The last thing you want to do in your retirement years is to desperately seek out extra sources of income.

Why not take a look at how much my Fidelity account has returned from my investments, which has been close to 10%.

If you really want to make some big changes, then you could look at moving to an area with a lower cost of living, either in the UK or abroad. Or, you could move to a smaller home to release some equity and lower your bills.

Seek advice

Of course, everybody’s financial situation is different and so an annual income that may be suitable for a relative might not be suitable for you. If you’re not sure what is best for you, speak to a financial advisor about your retirement fund. They will be able to give you pointers on how best to manage your retirement portfolio, such as ways to increase the money you have coming in, whilst minimising your taxable income.

Financial advice may cost you a small sum, but it’s often the best way to make the most of your money.

How much will you need in retirement each year?

There are plenty of studies out there that discuss how much we need per year when we reach retirement. However, I tend to take them all with a pinch of salt. They’re generally created by pension and investment companies who are keen on you to send more money their way. Because of this, I find that they’re more likely to inflate the figures you need.

With that said, they’re still useful for establishing a general idea, but only you can really know how much you spend each year.

A recent article by Hargreaves Lansdown shared findings by the Pensions and Lifetime Savings Association (PLSA), which looked at how much people needed in retirement (link to article).

It concluded that a single person who wanted to have a minimum lifestyle (with a little left over) would spend £10,900 per year. This increases to £16,700 for a couple.

For a moderate lifestyle, which may include an extra holiday, a decent car and meals out, this increases to £20,800 for a single person and £30,600 for a couple.

For what is deemed a comfortable lifestyle, which includes two holidays per year, a better car and plenty of money for eating out, a single person would need £33,600 and a couple, £49,700.

Minimum £10,900Moderate £20,800Comfortable £33,600
House workDIY and decorating one
room every year
Some help with maintenance
and decorating each year
Up-to-date kitchen and
bathroom every 10/15 years

Food shop£41 each week
£47 each week
£59 each week
TransportNo car
3 year old car replaced every 10 years
2 year old car replaced every 5 years

Holidays1 week and a long weekend away in UK every year2 weeks in Europe and a long weekend in the UK every year3 weeks in Europe every year
Clothing &
£410 every year
£730 every year
£1,200 every year
Birthdays£10 for each birthday present£30 for each birthday present£50 for each birthday present
Source: PLSA, October 2021. *These figures could fund this lifestyle for people living outside London.

It’s important to note that the article does not cover housing costs. Many people when they reach 60 will either still have a mortgage or will be paying rent. And with the average rent now over £1,000 per month, you may need to factor in around an extra £12,000 per year.

How long will £500,000 last?

Minimum lifestyleModerate lifestyleComfortable lifestyle
Number of years £500,000
will last for a single person
45 years24 years14 years
Number of years £500,000
will last for a couple
29 years16 years10 years
Number of years £500,000
will last for a single person
(plus annual rent of £12,000)
21 years15 years10 years
Number of years £500,000
will last for a couple
(plus annual rent of £12,000)
17 years11 years8 years

State Pension

So, depending on the lifestyle you choose, £500,000 could last you anywhere between 8 and 45 years.

But on top of that lump sum, don’t forget you’ll also receive a State Pension at 66, 67 or 68 depending on your current age. This stands at £179.60 per week (£9,339 per year), although how much you actually receive depends on your National Insurance record.

Once your State Pension begins, you can rely less on your half a million.

So, can you retire at 60 with £500k?

If you own your own home, have no high-interest debt and plan to live what is considered a minimum or moderate lifestyle, then the £500,000 should keep you going quite comfortably. And it will last far longer when combined with the State Pension once you reach the official retirement age.

The bad news is…

If you’re 20 years old and reading this, then you’ll be sad to hear that £500,000 won’t be enough when you hit 60. If inflation runs at an average of 2.5%, then you will need to have £1 million stashed away to have enough to retire at 60.

Good luck with your plans for retirement!

And if you’re interested in the subject of retirement, why not take a look at the best European countries to retire to.

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