As you envision your retirement dreams, have you ever wondered if it’s possible to retire at 60? By meticulously evaluating a range of critical factors such as healthcare expenses, the cost of living, and your potential Social Security benefits, this goal has the potential to transform into a reality. Delve into the following insights to understand the key elements that come into play when aiming for a retirement at 60.

How to Retire at 60 Years Old

Many people love their jobs but wish to retire early, and there are lots of valid reasons for that. You might want to spend more time with your loved ones as you get older, or want to travel while you’re still physically able.

Retiring at 60 is not very common—only 13% of workers say they plan to retire by then—but it isn’t impossible. It might take some revised expectations on lifestyle, and might even require you to pack up and move to a less expensive place. Retiring at age 60 usually necessitates a pretty sizable savings account, as Social Security benefits aren’t available until age 62, but plenty of retirees choose to live leaner or partially retire, maintaining a part-time or consultancy job with fewer hours to live more freely.

Calculating How Much You Need to Retire at 60

To retire at age 60, you need to evaluate your current financial situation and determine if you have enough saved. Most people use about 70–80% of their pre-retirement income during retirement; so if you’re used to $100,000 per year, in retirement you’ll likely need $70,000–$80,000 to mostly maintain your current lifestyle.

There are many other factors to consider. For instance, Medicare doesn’t kick in until age 65, so you’ll need to pay for higher premiums out of pocket for five years. Private insurance can be $300 or more per month.

In addition, if you retire before 59 ½ and withdraw from any of your tax-deferred accounts, you’ll be responsible for paying a 10% early withdrawal penalty.

Finally, note that retiring at 60 means you will need to wait two more years before you can start collecting Social Security benefits; these benefits can be a big boost to your income. The maximum monthly benefit for those who claim at 62 in 2023 is $2,572, while the maximum benefit for those who choose to wait to claim until they turn 70 would be $4,555—a sizable difference!

Another factor to consider is life expectancy. If you are in excellent health, you could live much longer than the average US life expectancy, necessitating your retirement savings to go much farther than others who may be in worse health.

How Much Should a 60-Year-Old Retire With?

Research suggests that many retirees withdraw 3% annually of their total portfolio to use for living expenses during retirement, with the goal of having that portfolio last 30 years. Using this rule, in order to withdraw $70,000 every year, you would need a portfolio of at least $2.3 million.

How Much Do I Need in My 401k to Retire at 60?

Using some age-based milestones, you can get some helpful benchmarks for your savings.

• By age 30, aim to have 1x or 2x your annual salary saved. If you’re making $35,000, you should have $35,000 saved.
• By age 40, aim to have 3x or 5x saved.
• By age 50, aim to have 6x or 8x your salary saved.
• By age 60, if you plan to retire, you should have 10x or more (ideally 12x) of your annual salary saved. If you are earning $75,000 per year, plan to have at least $750,000 saved.

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I’m 60 Without Savings: Can I Still Retire?

If you have no savings, you should wait until 62 to retire so you can at least rely on your Social Security benefits—though you should know that these will likely not be enough to sustain your annual spending in the US. To retire at 62, you might want to consider moving to a very inexpensive place, such as Panama or Mexico—in these countries, the dollar goes much further.

It’s also not too late to start saving at age 60. Consider waiting to retire for a few more years and saving as much as you can to make those retirement years easier—if anything, getting adjusted to a more frugal lifestyle will help you prepare for life after retirement! You won’t be able to save so much that you can go on tours of Europe every year, but with the help of a financial advisor, you could build an emergency nest egg that can get you through difficult periods.

You could also consider switching to part-time work if you want to “half-retire”—this way, you’ll still have income coming in but you won’t have to spend all of your time working.

How Much Retirement Income Can I Receive At 60?

Using a retirement calculator, you can estimate how much you will receive in retirement depending on how old you are now, how much you have saved, and when you wish to retire. This can help you determine if you need to put your savings plan into high-gear, retire later than anticipated, or plan to live more frugally when you do retire.

Review the tables below to get a snapshot of what kind of income you might have based on retiring at either age 60 or 65, with differing savings. These tables assume an annual return of 4%.

Retiring at 60

Retiring at 65

Creating a Solid Retirement Plan

As we mentioned, setting savings benchmarks for different ages throughout your life is a great way to make sure you’re on track of your retirement goals—plan to have at least 10x of your income saved by the age you plan to retire.

Because everyone’s life situation is different, it’s always wise to work with a professional financial advisor to help you review the nitty-gritty—if you have extra medical costs, for instance, or wish to save to move to another city or country in retirement.

If you’re just setting out on your retirement saving journey, make sure to take advantage of any employer-sponsored retirement plans offered to you. Many employers will match your retirement savings contributions up to a certain percentage (usually 3%)—that’s essentially free money for you to supercharge your savings.

Optimizing Your Investment Portfolio

Modern portfolio theory (MPT), popularized by economist Harry Markowitz in the 1950s, states that investments can be high risk/high reward or low risk/low reward. Most people require a mix of investments of both types, in line with their personal risk tolerances. In other words, if too many high risk investments will keep you up all night, focus on a mix that emphasizes lower risk ones.

Diversification is an important core component of any portfolio. A portfolio with a diverse set of assets won’t be as impacted should world events cause several publicly-traded companies and the stock market to wildly fluctuate. In addition, diversification is often shown to improve overall returns and minimize risk.

To find the best portfolio balance for you and your retirement goals, you should try to work with a trusted financial advisor. They should be able to address how far off you are from your goals, what kind of investments you need to get there, and the risk tolerance right for you. As you grow older, you might consider lower risk investments as you get closer to retirement; high-risk investments are traditionally for younger people as they have a much longer timeline to recover from loss.

Maximizing Retirement Accounts

There are numerous ways to ensure you’re making the most of your retirement accounts and planning for the future.

• Start saving yesterday: If you haven’t started a savings account yet, today’s the day. Many can be opened with as little as $1, and every $1 counts! It’s never too early or too late; with every year, you will see compounded growth on your savings that can be used during retirement.
• Participate in your workplace plan: If your employer has a sponsored retirement plan, be sure to sign up for it. Many companies offer matching contributions on these plans, a simple way to boost your savings.
• Pay down debt: Debt can prevent you from saving for anything. Pay down your high-interest debt first, like credit card debt, then pay off other loans (car loans, student loans) until you’re debt-free. Funnel the money you were using for debt payments into your savings account.
• Open an IRA: Even if you have a 401(k) through work, you can open a separate IRA and maximize the contribution limit each year to create another retirement savings vehicle.
• Take advantage of catch-up contributions: Catch-up contributions allow you to make additional contributions to your 401(k) or IRA after you turn age 50—this is a great way to get extra money in your savings when you’re nearly at the finish line, and still get some years of compounding interest.

Planning for Healthcare Expenses

Healthcare will likely be one of your largest expenses during retirement, alongside housing and transportation. Many people assume that Medicare will cover all their healthcare costs, but it doesn’t, so it’s wise to look at all available options. In addition, Medicare doesn’t kick in until age 65, so if you retire before that age, you’ll need to pay out of pocket for your coverage.

According to Fidelity, a single person, age 65, will need $157,500 saved (after tax) to cover all healthcare expenses in retirement. A same-age couple will need $315,000 saved. Obviously, this figure is a ballpark—the actual amount you’ll need will be based on your retirement age, your health, where you retire, how long you live, and more.

If your employer offers an HSA-eligible plan, consider enrolling. An HSA is a way to save, in a tax-efficient way, for healthcare costs that arise in retirement. You can contribute pretax dollars (and sometimes employer contributions), which can be withdrawn tax-free if used to pay for qualified medical expenses.

As you get closer to 65, it’s important to understand all the Medicare options. You’ll have a 7-month initial enrollment period that begins three months before the month you turn 65. You’ll be able to choose from Part A, Part B, Medicare Advantage, as well as supplemental policies. The supplemental policies are offered by private insurance companies to cover some expenses that Parts A and B do not.

Debt Reduction and Management

Debt can hold people back from saving money—paying bills takes priority, and that money that you would normally save goes to your debtor. High-interest credit cards can hold you back, but luckily there are many strategies to help you become debt-free as soon as possible.

Focus on the debt with the highest interest

This is likely credit card debt. Pay off any loans or credit cards with the highest interest first, then work your way down the list to pay off the other debts. You might consider consolidating your high-interest credit card balances onto a zero-interest card, and then aggressively pay off the zero-interest card to get that balance to zero.

Revise your budget

Take a close look at your budget and see if there are places where you can cut back. Any extra $10 or $20 put towards your debt will help you get out of it faster.

Don’t open new debt

This should go without saying, but obviously when you’re in a period of trying to reduce your debt, you should not open any new credit cards or take on new loans.

Get a second job

Taking on a part-time job can help you generate extra income to pay down debt faster.

Alternative Income Streams in Retirement

If you’re looking for passive income opportunities to help you build savings or live more comfortably during retirement, there are a number of consultancy jobs or part-time gigs that work very well for retirees. You might consider these jobs as alternative income streams during retirement:

• Invest in real estate investment trusts (REITs)
• Rent out a room in your home
• Rent out your car
• Become a consultant or teach others your skills

Social Security and Pension Benefits

To qualify for Social Security, you must earn 40 credits in your lifetime—a credit in 2023 is defined as $1,640 in earned income. You can earn up to four credits per year.

Once you are ready to apply for Social Security, you must fill out an application online or at a local Social Security Administration office. You can apply for your benefits once you turn 62, though you do not have to take them at 62; you can wait up until you turn 70, at which point you will be required to start receiving your benefits. If you take your benefits at age 62 rather than waiting until your Full Retirement Age (FRA), your benefits will be permanently reduced by about 30% for the rest of your life. On the flip side, if you wait until you turn 70 to take your benefits, you will receive more than your average indexed monthly earnings (AIME)—124% of your standard benefit if your FRA is 67 or 132% if your FRA is 66.

Obviously, waiting as long as you can to collect Social Security can be beneficial to your retirement income. That said, you will need to weigh your quality of life, health, and retirement plans and determine if waiting is worth it to you.

Another guaranteed income source might be a pension plan, or defined-benefit plan. These plans are not as popular as they used to be, given that they require the employer to guarantee the employee a specific monthly payment after retiring for the rest of their life, regardless of the performance of the investment pool. The employer is on the hook for the pension payments to the retiree, and the payment is calculated based on earnings and years of service.

Final Thoughts

To sum up, consider working with a financial advisor to help you assess your current financial situation and determine if retiring at age 60 is feasible. It might require you to budget and spend differently, but if your goal is to be work-free as soon as possible, this goal is not out of the question.

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