$700,000 is a hefty retirement savings, but will it sustain your lifestyle and spending through your golden years? Those who wait as long as possible to collect their Social Security benefits or are lucky enough to have zero debt might find that $700,000 is enough to retire, especially in a smaller city such as Houston or Albuquerque. Learn how far your $700,000 will go and what adjustments you can make to ensure that it lasts you all the years you need it to.

How Earnings and Inflation are Impacting Retirement for Many Americans

In June of 2022, inflation reached a staggering high of 9.1%—this is the highest jump seen since the 1980s. Since then, the rate has dropped, but it is still above the 2% average that indicates price stability. As of January 2024, the rate was at 3.1%, which means that Americans' paychecks are not going as far as they used to for common consumer items. In short, it’s more expensive to pay for groceries, gas, and other necessities.

Categories Hit Hardest by Inflation

These are some of the categories hit hardest, with percentages indicating year-over-year price changes:

• Juices and other drinks: 29%
• Beef steaks: 10.7%
• Sugar: 7.2%
• Baby food: 8.7%
• Peanut butter and other fats: 5.1%
• Electricity: 3.8%

Given the overall higher cost of goods, some are finding that they need to cut back on retirement savings. In addition, the New York Times reported in 2023 that there has been an increase in the number of hardship withdrawals taken out of 401(k) accounts. Ultimately, this has delayed retirement for many, with some people saying it’s entirely out of reach.

Even if you haven’t needed to withdraw from your account or pause saving, it’s likely that inflation has had some effect on your retirement saving vehicles—different accounts weather inflation in different ways.

Social Security

While Social Security benefits are evaluated every year to be adjusted against the cost of living, these adjustments have historically been seen as inadequate. The Senior Citizens League reported that seniors lost one-third of their buying power between 2000 and 2021. The League also noted that the cost of goods and services increased by 99.3% between 2000 and 2020, while the Social Security COLA adjustments only rose by 53%.

Note: By waiting until you are older to take your Social Security benefits, the more you will receive each month. When you take the earliest Social Security option, you dramatically reduce your monthly payout for the remainder of your life.

Pensions

Pension plans are typically tied to several of your last years of salary rates. If a period of high inflation hits during the last few years of your working years, it’s possible that your final benefit amount may come in lower as the calculation was made on pre-inflation salary. If high inflation hits after you retire, your payouts will be based on the salary you earned previous to inflation. It’s also important to note that private pensions often do not adjust for inflation at all—only state or local government plans.

401(k) and IRA Accounts

Investments and dividends don’t adjust for inflation, so the money invested in your 401(k) or IRA can be negatively impacted during periods of high inflation. For example: if you’re getting a return of 10% on your 401(k), but inflation hits 8%, you’ll only see a 2% gain on your investment. If you’re getting a return below 8%, your net gain will be negative.

Tip: 401(k) accounts are still good investment vehicles as they see a higher interest rate than many other types of accounts.

Ways to Mitigate Inflation’s Impact on Retirement Savings

• Diversify: You shouldn’t hold only stocks or only bonds—make sure there’s a nice diversification in your portfolio holdings. Discuss your specific investments with a Certified Financial Planner.
• Adjust your planned spending: Plan for potential inflation during retirement by adjusting your budget accordingly.
• Pay off debts: Pay off adjustable-rate mortgages and credit card debt before you retire to avoid rate jumps during high inflation periods.
• Hire a Certified Financial Planner: A professional can help you strategize and set up milestones to reach your retirement goals.

Is $700K Enough to Retire on in 2024?

$700,000 is a significant amount, but it requires careful planning to ensure it lasts. Ideally, you should live off the returns on your investments without touching the principal.

With $700,000 saved and an average annual return of 10–12%, you could have between $70,000 and $84,000 per year. If returns are lower, say 8%, you’ll only have $56,000 and may need to dip into your principal.

Major Costs to Consider During Retirement

• Housing: Home maintenance and rent costs may rise during retirement.
• Healthcare: The average 65-year-old couple spends around $12,000 on healthcare in their first year of retirement.
• Transportation: Rising gas prices or the need for alternate transportation can increase costs.

Factors to Consider When Figuring Out How Much You Need for Retirement

• Cost of living: Inflation typically jumps by 1–2% annually but has been higher since the COVID-19 pandemic.
• Taxes: State tax laws vary, and some states tax Social Security.
• Lifestyle: Consider whether you want to downsize or maintain your current standard of living.
• Health: Medical conditions can increase costs; many retirees choose supplemental Medicare plans.
• Location: State and city taxes, housing costs, and transportation needs are major considerations.
• Income sources: Look at all income sources beyond Social Security, such as rental income and IRAs.

How to Retire on $700K by Age

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Frequently Asked Questions

Can you live off monthly interest on $700,000?

If your annual returns are 5%, you would be working with $35,000 per year, or about $2,916 per month. However, returns can vary depending on your investments — they could be higher or lower. If you're not confident in your current portfolio, it's essential to speak with a Certified Financial Planner to devise a solid strategy. Keep in mind that lifestyle choices, spending habits, and existing debt will also play a role. For instance, those who have already paid off their mortgages will find it easier to live on their retirement savings. Additionally, you might consider delaying your Social Security benefits. If you wait until age 70 to start collecting, you will receive the maximum benefit, significantly increasing your monthly income.

Can a couple retire on $700,000?

Stretching $700,000 for two people requires significant financial planning and strategy. If both partners are in excellent health, they may live longer, meaning the funds need to cover additional years. Healthcare costs can also be a significant factor, especially if either partner has medical conditions requiring ongoing care. Ideally, the couple should look for ways to reduce spending to make the $700,000 work effectively. One partner might also consider working part-time to supplement income. It's crucial to calculate the combined Social Security benefits and understand local and state taxes, as these will impact the overall retirement income.

Can I retire at 50/55/60/65 with $700,000?

Determining when you can retire with $700,000 requires a thorough review of your lifestyle, desired retirement plans, and current expenses. The best approach is to consult with a Certified Financial Planner who can assess your current investments and provide tailored advice. They may suggest adjustments to your spending habits or identify areas where you can cut back, allowing you to retire at your preferred age. It's essential to have a strategy that accounts for inflation, healthcare costs, and unexpected expenses that may arise throughout your retirement years.