How much money do you need to retire at 60? That depends entirely on how much you plan to spend in retirement. Absent a large pension or other source of income, as your expenses grow, your retirement savings must also. While retiring at 60 isn’t terribly early, it is before Social Security and Medicare eligibility begins.
4 Factors That Affect How Much You’ll Need to Retire
- Income needed to support your lifestyle in retirement (driven by your lifestyle expenses). This is particularly important at the beginning of retirement.
- Your options for healthcare coverage before Medicare begins at 65
- Savings in taxable accounts
- Longevity and inflation
How Much is Enough to Retire?
The table below shows four different Monte Carlo simulations for starting retirement assets between $2M and $15M. A safe annual withdrawal rate (reflected in today’s dollars) was backed into for both a 25- and 45-year retirement time horizon. All simulations required a probability of success (odds of never running out of money) of at least 80%. See the key assumptions below and refer to the end for important information about the analysis.
So for example, in this hypothetical simulation, a retiree with a $10 million portfolio could have cash flow of $470,000/year (increasing 2.5% annually to keep pace with inflation) for 25 years with an 80% probability that he/she will not run out of money prematurely. If we further assume a simple flat tax rate of 25%, after-tax income in year one would be roughly $353,000.
Spending Drives How Much Money You Need to Save to Retire at 60
Estimating expenses in retirement is difficult. Some expenses stop while new costs arise. Spending often peaks the first few years of retirement. While some investors overestimate retirement spending needs, others underestimate at least one major category: housing.
Before getting consumed with your travel budget, recognize that where you’ll spend money will change throughout retirement. As some costs increase (like healthcare), other expenses (like food and travel) decrease.
While expenses will ebb and flow over the years, it’s most important to monitor spending just before and after retirement. This period is pivotal because retirement savings are generally at their highest levels, making you most vulnerable to stock market volatility. If retiring at 60 is your main priority, reducing your spending assumptions during retirement might be an acceptable trade-off to make the numbers work.
Inflation and purchasing power are key concepts in retirement planning. For example, using a 3% inflation rate, $150,000 in annual expenses today will require more than $350,000 in 30 years to stay flat. Portfolio growth is key, but net of inflation, a 6% nominal return comes to a 3% real return, net of our assumed 3% annual inflation rate in this example.
Your Spending Will Have Longevity, Too
Here are some statistics according to American Academy of Actuaries and Society of Actuaries, Actuaries Longevity Illustrator, www.longevityillustrator.org/, (accessed April 7, 2026).
Assume a 60-year-old couple are non-smokers in excellent health:
- The female has a 73% probability of living until 85 and 54% chance of living until 95
- The male has a 64% probability of living until 85 and 44% chance of living until 95
- There’s a 74% chance at least one person lives until 90 and the odds are 17% of living until 100 (nearly one in five!)
- The probability of both living to age 85 is 47%, dropping to 24% by age 90
60 May Not Be Too Early to Retire, but it is Too Soon for Social Security
The good news is that retiring at 60 means instant access to penalty-free withdrawals from IRAs, which begin at age 59 1/2.
As you work to figure out if you can retire at 60, cross Social Security benefits off your list of potential income sources. Eligibility for Social Security benefits starts at 62 for retirees. Also, you’ll want to weigh whether you should file for benefits as soon as possible or hold off for larger checks. This might mean tapping retirement accounts to delay Social Security.
Another consideration is spousal benefits. Claiming benefits before full retirement age not only reduces your retirement benefits, but it’ll also reduce spousal benefits. If your benefits from your own working record are likely to be roughly equal, this won’t matter much. Remember, Social Security projected benefit statements assume you work until your claiming age.
Social Security benefits include 35 years of average earnings, which might not be an issue for individuals who started working before 25 without interruption. But if you took a break to raise a family, go to law school, etc., the Social Security Administration might use $0 salary for a few years when calculating benefits. Review your statement to confirm your earnings history.
Paying for Health Insurance Until Medicare Eligibility Begins at 65
If your spouse is still working, you can probably get health insurance there. If not, paying for medical insurance until Medicare at age 65 may be prohibitive. In general, early retirees have five options for health insurance before Medicare:
- Retirement health insurance continuation from your employer
- COBRA coverage
- Public exchanges
- Private insurance exchanges
- A spouse’s plan
COBRA coverage generally only lasts for 18 months if you retire early. If you retire at 60, you need five years. Health insurance marketplace exchanges are usually more affordable than private insurance, but still costly. This varies by state. Check costs in your area with this calculator from the Kaiser Family Foundation.
Before going with the lowest cost plan, consider out-of-pocket costs and the likelihood of forgoing medical care. There’s no point in retiring early if you’re not going to live long enough to enjoy it! Five years is a long time to try and get by on a bare-bones health insurance plan, so be sure to adequately budget for medical expenses. If you’ve been putting money away in a health savings account (HSA), it’ll be easier to bridge the gap.
Saving Outside of Retirement Accounts
Unless you have a significant pension, you’ll generally have the best opportunity to retire early if you have investment assets outside of retirement accounts. Taxable accounts (brokerage accounts) offer tax planning opportunities in retirement and provide needed flexibility. Especially for high earners or one-income households, maxing out 401(k) contributions probably isn’t enough.
A taxable brokerage account is the most flexible type of investment account. There is no contribution limit or rules about when you can sell funds and withdraw the cash. In exchange for flexibility, you sacrifice the tax-deferred growth and tax deduction you get with 401(k) contributions.
But that’s not to say a brokerage account is tax inefficient, either. Long-term capital gains tax rates are much more favorable than 401(k) or IRA withdrawals which are taxed as ordinary income.
As I illustrate in this analysis for Forbes, a couple both maxing out their 401(k)s from age 35 to 65 are likely to attain a safe retirement income of $65,000 annually, increasing by inflation. Why not more? Because we ran a Monte Carlo simulation, which accounts for market volatility and the timing of fluctuations — what we like to call a stress test.
Using a Monte Carlo Risk Simulation in Retirement Planning
If we ran the same analysis but using a level annual return with no deviation (much like the calculators found online), the couple would think they could spend $100,000 per year instead. At this level of spending, there’s a 50% chance they would run out of money during retirement under normal market conditions.
Or consider this illustration from J.P. Morgan which assumes a $1M starting portfolio and 4% withdrawals annually, adjusted for inflation (2.5% per year). Each scenario averages a 5% rate of return over the entire period, but due to sequence risk, the retiree who experiences the largest drawdowns at the start of retirement and the highest returns towards the end runs out of money much faster.
Asset Allocation and Risk Management
Because of sequence risk, diversifying and reducing risk in the years leading up to retirement are often critical. That doesn’t mean the standard 60/40 portfolio or the 4% rule is right for everyone, though. And in many cases, it’s not. Work with a financial planner to discuss your personal situation, goals, and investment options.
For early retirees, investing too conservatively creates yet another risk of running out of money prematurely. Consider a global portfolio of U.S. and international equities and fixed income and put a plan in place to rebalance.
Also consider asset location in your investment management strategy to improve tax efficiency. This means tilting more tax-inefficient investments towards tax-deferred retirement accounts. Also consider the pros and cons of tax-loss harvesting.
Navigating Withdrawals in Retirement
Required withdrawals from pre-tax IRAs and 401(k)s begin at age 73 and 75 depending on your age. But that doesn’t mean it’s always best to wait. Timing distributions from retirement accounts in low-tax years before RMDs begin and annual Roth IRA conversions can be great strategies to consider after retiring early.
Investors often ask about retiring on dividends, but they often don’t realize how much money they’ll need invested to generate enough income from dividends to cover lifestyle expenses. Over the last 30 years, the S&P 500’s average dividend yield was 2%. So historically, every $1 million invested would yield annual dividend income of $20,000 on average…before tax.
As discussed earlier, taxable accounts are a great bridge in an early retirement. Managing income needs and market fluctuations also requires good cash management to avoid taking money during a sharp downturn. Maintain proper emergency cash reserves and consider structuring a Treasury ladder to meet income needs.
Figuring Out If You Can Retire
Stress-testing retirement projections can help investors feel more confident they won’t run out of money under different conditions in the financial markets. Before making a major financial decision like when to retire, it’s important to understand the potential outcomes for your portfolio and associated probabilities of success.
If the results aren’t what you hoped, consider trade-offs, like working longer or reducing your biggest expenses. Investors sometimes believe taking on more investment risk will help them reach their goals, but that’s not often the case. And try to avoid unilaterally reducing your lifestyle expenses for the purposes of the analysis. We recommend identifying specific costs to ensure they’re compatible with your goals and actual spending habits.
For guidance that takes your entire situation into account, consider working with a CERTIFIED FINANCIAL PLANNER™ professional to develop a financial plan and help ensure you stay on track throughout retirement with ongoing investment management and advisory support.
Putting everything together in a comprehensive financial plan is often the best way to determine how much you need to retire. Running the numbers will help you understand what trade-offs exist and what options best suit your needs and goals.
About Darrow Wealth Management
Darrow Wealth Management is an independent fee-only financial advisor and full-time fiduciary, offering ongoing investment management and financial planning services for individuals and families in Greater Boston and across the U.S. Learn more about our Wealth Management Services or schedule a phone consultation with an advisor.
Retirement: Planned.
Speak with a CERTIFIED FINANCIAL PLANNER™ professional about your retirement goals.
[Last reviewed April 2026]
Disclosures
Examples in this article are strictly hypothetical and for illustration purposes only. Past performance is not indicative of future results. This is a general communication for informational and educational purposes only. This article is not personal advice or a recommendation for any specific investment product, strategy, or financial decision. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. If you have questions about your personal financial situation, consider speaking with a financial advisor.
Return and volatility assumptions used in this analysis are hypothetical in nature and do not reflect the actual or expected future performance of any specific index, security, or investment strategy. Transaction costs and other investment expenses were not considered in this analysis. For simplicity, the components of return are not considered, therefore the analysis assumes the entire return is price appreciation. After-tax figures assumed a flat 25% tax rate and zero cost basis. In practice, the nature of the account, asset, and type of taxable income will produce different results.
