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Are you wondering if you can retire at 62 with 300k? If so, you are not alone.
The key to knowing when if you can retire at 62 with 300k is knowing your Financial Independence Number (FIN). Your FIN tells you how much you need to generate enough income in retirement. Retiring (at any age) means you have become financially independent, and are able to generate enough passive income to support yourself reliably.
Bear in mind that there can be benefits to retiring later than age 62. For example, if you retire later, your money may last longer. But, you didn’t come here to read about retiring later. You came here because you want to know if you can retire at age 62 with 300k!
Related read: A side hustle is an excellent way to supplement your total retirement income.
If you are paying off student loans, it may be too soon to think about retirement. That’s especially true if you need to pay off these loans.
Whether or not the amount you end up with at a certain age is enough to live on, depends on how you expect to live in retirement and when you expect to retire. For example, if you’re wondering when can you retire, you need to plan your income and expenses long before you retire.
If you’re looking to confirm a single number i.e., 300k, that can be your goal to retire, there are a few things we first need to figure out.
Create a 300k at 62 retirement budget
If you want to know if 300k is enough to retire at age 62 (or any age), the first thing you’ll need to do is create a retirement budget. A retirement budget is key to knowing when can you retire. What you might expect to have in retirement. For instance, younger folks might have credit card debt, car loans, and mortgages. However, those (hopefully) are not a consideration in retirement. Perhaps they will be replaced with travel or other fun things. Also, you should pay some attention to your emergency fund, to ensure it’s fully funded.
You can use ours, and start filling in your expected income in retirement, starting with any pensions you might receive. Further, you can add any rental/other income. The only income to omit is Investment Income. Why? Because the investment income will get calculated as a result of your Financial Independence number. And
Determine your Financial Independence Number
Once you’ve calculated your expenses and income from pensions, rentals, etc., we’ll need to figure out how much income you can safely generate from your investments. At this point, you’ll have a better idea if 300k is enough to retire at age 62, or any age. Indeed, financial professionals often use the “4% rule” for generating investment income.
4% Rule – A key to knowing when can you retire
The 4% rule works like this. You multiply your total portfolio (Stocks, Bonds) by 4%. And, that becomes the annual amount you can generally, safely withdraw – in perpetuity. As it’s a yearly number, divide it by 12 to get a monthly amount. For the purposes of this article, say you’re age 62 with 300k in retirement savings. 4% of 300k is $12,000. In other words, if at age 62 you have 300k in retirement savings, you retire, you could safely generate $1,000/mo from that portfolio.
Does this sound a bit daunting? For ease, we have implemented the financial independence number calculation in the retirement budget above. The financial dependence number determines how much is enough for you to retire. Wither it’s age 62, 65, or any age.
Putting It All Together
If your total retirement income exceeds your predicted expenses, you have enough for your retirement.
If it looks like you’re going to come up short, you need to make adjustments. For example, you can find ways to increase your income or cut your spending.
Suppose you find that you cannot retire at age 62, or at any age, with the 300k. What then? Well, you can save another few years and retire at 65, or 67. Alternatively, work to reduce expenses.
Again, this does not take into account any other retirement income you might have. But, the sooner you invest the more you will have in retirement. That is why I say that the best time to start planning for retirement is right now, which gives you more time to make money. If you invest earlier, you need to invest more before you retire, and that is not good for your long-term financial health.
Its important to have a good sense of what your costs will be so that you can incorporate these costs into your overall pension strategy and plan for them.
If your retirement account balances are lower than you would like it to be, this should also be taken into account as it will prevent you from retiring.
Frequently Asked Questions
In short, it’s possible, but, first, you’ll need to know how much pension and other passive income you’ll be getting. Once you add all your passive income sources, and your pension, you can then work with a financial advisor to come up with an appropriate withdrawal rate for your 300k.
Final Thoughts About Retiring at 62 with 300k
Assess whether you want to carry on working or whether retirement is realistic for you based on your income and current level of savings.
Once you’ve narrowed down how much you need for retirement, you need to be honest with yourself about your current income level and the amount of savings you have in your retirement accounts. To me, 300k might be ok to retire at 62, or any age, IF there is enough additional income to support you in retirement.