How Long Will $500k Last in Retirement? Complete Analysis
Withdrawal rate scenarios, inflation impact, and strategies to make your money last.
Key Takeaways
- 1At 4% withdrawal ($20k/year), $500k should last 30+ years with high probability.
- 2At 5% withdrawal ($25k/year), you'll likely deplete funds in 20-25 years.
- 3At 6% withdrawal ($30k/year), expect to run out in 15-20 years.
- 4Inflation reduces purchasing power - $500k today buys less each year.
- 5Sequence of returns risk: a crash early in retirement is far worse than later.
- 6Diversifying into gold can extend portfolio longevity by reducing volatility.
Withdrawal Rate Scenarios
How long your $500k lasts depends primarily on your withdrawal rate and investment returns. Here are the scenarios:
- The 4% rule is the traditional "safe" withdrawal rate
- Higher rates provide more income but risk depletion
- Lower rates may mean a less comfortable lifestyle
- Your other income sources (Social Security, pension) reduce needed withdrawals
| Withdrawal Rate | Annual Income | Expected Duration | Risk of Running Out |
|---|---|---|---|
| 3% | $15,000 | 33+ years | Very Low |
| 4% | $20,000 | 30+ years | Low (Traditional Rule) |
| 5% | $25,000 | 20-25 years | Moderate |
| 6% | $30,000 | 15-20 years | High |
| 7% | $35,000 | 12-17 years | Very High |
Assumes diversified portfolio with 60% stocks, 40% bonds
How Inflation Erodes Your $500k
Inflation is the silent killer of retirement plans. Even at 3% inflation, your purchasing power drops significantly over time.
- At 3% inflation, your money buys 45% less in 20 years
- Fixed income sources like pensions lose purchasing power
- Social Security has COLA adjustments - partial inflation protection
- Your portfolio needs to grow to maintain real purchasing power
| Years | At 2% Inflation | At 3% Inflation | At 4% Inflation |
|---|---|---|---|
| Year 1 | $500,000 | $500,000 | $500,000 |
| Year 10 | $409,000 | $372,000 | $338,000 |
| Year 20 | $335,000 | $277,000 | $228,000 |
| Year 30 | $274,000 | $206,000 | $154,000 |
Purchasing power of $500k in today's dollars
Sequence of Returns Risk: The Hidden Danger
When you experience market losses matters enormously in retirement. A 30% crash in year one is far more devastating than the same crash in year 20. This is called **sequence of returns risk** - and it's why a diversified, stable portfolio matters more in retirement than during accumulation.
- Bad returns early + withdrawals = permanent portfolio damage
- You're selling shares at low prices to fund living expenses
- The portfolio never fully recovers even when markets do
- This is why retirees need more conservative allocations
Sequence Risk Example
Two retirees both average 6% returns over 20 years. One gets bad returns early, one late. The early-crash retiree runs out of money in year 18. The late-crash retiree still has $200,000 left.
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Strategies to Make $500k Last Longer
Several strategies can extend how long your $500k lasts:
- 1**Lower withdrawal rate early:** Start at 3.5% and increase later if portfolio grows
- 2**Delay Social Security:** Higher lifetime benefits reduce portfolio withdrawals
- 3**Part-time work:** Even modest income dramatically extends savings
- 4**Dynamic withdrawals:** Reduce spending after bad market years
- 5**Bucket strategy:** Keep 2-3 years cash to avoid selling during crashes
- 6**Diversify into uncorrelated assets:** Gold provides stability when stocks crash
Calculate Your Money Longevity
Use our Money Longevity Calculator to see exactly how long your savings will last based on your specific situation, withdrawal rate, and expected returns.
- Input your starting balance, expenses, and other income
- See year-by-year projections
- Test different scenarios (market crash, inflation spike)
- Understand your probability of success
The First 10 Years Are Critical
Research shows that portfolio performance in the first decade of retirement largely determines success or failure. A severe crash early on, combined with withdrawals, can permanently cripple your savings even if markets recover.
Gold: Extending Portfolio Longevity
Physical gold in a Gold IRA can extend how long your retirement savings last by reducing volatility and providing an asset to sell during stock market downturns.
- Gold historically rises when stocks crash - reduces sequence risk
- Sell gold during downturns instead of stocks at low prices
- Reduces overall portfolio volatility
- 5-15% allocation recommended by financial researchers
- Augusta Precious Metals helps retirees protect and extend savings
Frequently Asked Questions
1How long will $500,000 last in retirement?
Using the traditional 4% rule ($20,000/year withdrawal), $500,000 should last 30+ years with a diversified portfolio. Higher withdrawal rates shorten this significantly - 5% might last 20-25 years, 6% might last 15-20 years.
2Is $500k enough to retire on?
It depends on your other income sources and expenses. $500k alone provides only $20,000/year at a safe withdrawal rate. Combined with Social Security (average $21,000/year) and potentially a pension or part-time work, it can support a modest retirement.
3What is a safe withdrawal rate for retirement?
The traditional "safe" withdrawal rate is 4%, based on research showing this rate has a high probability of lasting 30 years. However, some financial advisors now recommend 3.5% or dynamic strategies that adjust based on market performance.
4How do I protect my retirement savings from market crashes?
Key strategies include: keeping 2-3 years of expenses in cash/bonds (bucket strategy), reducing withdrawal rate after bad years, diversifying into uncorrelated assets like gold, and maintaining an appropriate stock/bond allocation for your age.
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