Can You Retire at 62 With $500K? We Ran the Numbers

$1,667 a month. That's roughly what $500,000 pays under the classic 4% rule: about $20,000 in the first year (SoFi, SmartAsset via Yahoo Finance). So can you retire at 62 with 500k? For some people, yes. It works when your monthly spending is modest, Social Security covers a real share of it, and you have a plan for health insurance until Medicare starts at 65. If any of those three is shaky, the odds fall quickly.

Below, we work through the numbers: what the portfolio pays, what Social Security adds at 62, three sample budgets, and the 2026 health insurance change that most articles on this question leave out.

The short answer: can you retire at 62 with $500K?

It depends on three things:

1. What you spend each month. This matters most.
2. When you claim Social Security. Claiming at 62 gives you money now but a smaller check for life.
3. How you pay for health care from 62 to 65. That gap got more expensive this year for many early retirees.

If your spending minus Social Security leaves a gap of about $1,600 a month or less, you're close to the range that research treats as sustainable. If the gap is much bigger, $500K alone probably won't carry it for 30 or more years.

What $500K actually pays

The 4% rule is the usual starting point. Take out 4% in year one, then adjust for inflation each year after that. On $500,000, that's $20,000 a year.

More recent research is a little more cautious. Morningstar's 2025 work puts the safe starting withdrawal rate at 3.9%. Morningstar defines "safe" as the money still being there in 90% of simulated outcomes over a 30-year retirement. On $500K, 3.9% works out to $19,500 a year, or about $1,625 a month. Source: Morningstar, The State of Retirement Income 2025 · Dec 2025

One detail matters here. Morningstar tested a 30-year retirement. If you stop working at 62 and plan to age 95, you need 33 years of income. That isn't overly cautious. Social Security's own planning guidance says about 1 in 3 65-year-olds may live to 90 or beyond. Source: Social Security Administration, Retirement Information for Medicare Beneficiaries · 2026

So treat about $1,600 a month from the portfolio as a reasonable ceiling to start from. It isn't a guaranteed floor.

Add Social Security: what claiming at 62 costs you

If you were born in 1960 or later, your full retirement age is 67. Claiming at 62 permanently cuts your benefit by 30% (Maximize My Social Security, Motley Fool). Each year you wait after full retirement age adds about 8%, up to a 24% increase at 70.

SSA's average retired-worker benefit for 2026 is $2,071 a month. Reduced by 30%, that's about $1,450 at 62 (WTOP). The table below uses $2,071 as a hypothetical full-retirement-age benefit to show how timing changes the check:

Your own number may be well above or below this. For someone who earned the taxable maximum every year, the 2026 maximum is $2,969 at 62, $4,207 at full retirement age and $5,181 at 70 (Maximize My Social Security). Check your statement at SSA.gov before you plan around any figure.

Three budgets, run through the same math

Here's the arithmetic most articles skip. Assume Social Security at 62 of about $1,450 a month. The portfolio covers whatever is left. Spending here means everything: housing, food, taxes and health insurance premiums.

What this shows:

• $3,000 a month puts you just under Morningstar's 3.9%. That's a reasonable starting point, though remember the 30-year versus 33-year difference above.
• $4,000 a month needs about 6% a year. Some pages say $30,000 a year is possible "depending on costs." This table is what that claim means: a withdrawal rate well above what research treats as safe.
• $5,000 a month needs more than double the safe rate. A pension, part-time work, or a much larger Social Security check would have to make up the difference.

This is simple division, not a forecast. It ignores investment returns, inflation adjustments and bad market years. Those are the factors a simulation adds.

The health insurance gap between 62 and 65

Medicare starts at 65. Between 62 and 65 you'll most likely be paying for COBRA, a marketplace (ACA) plan, or a retiree plan if your former employer offers one (Boldin, SoFi).

Many articles on this question still don't mention what changed in 2026. The enhanced ACA subsidies expired on December 31, 2025. The original rules came back on January 1, 2026 (Trekis). That brought back the "subsidy cliff." If your income is above 400% of the federal poverty level, you get no premium tax credit at all. For 2026 coverage, that line is $62,600 for a single person and $128,600 for a family of four in the 48 contiguous states (healthinsurance.org).

How much this costs:

• KFF estimated that subsidized enrollees would pay about 114% more on average, roughly $1,016 more a year (Healthy FP).
• The Urban Institute projected that average annual premiums for people above the cutoff would rise from about $4,400 to about $8,500 (CNBC).
• People aged 55 to 64 are among the hardest hit (TaxCliffs).

Why account type matters. Subsidies depend on income. Withdrawals from a traditional IRA or 401(k) count as taxable income. Qualified Roth withdrawals generally don't. So $500K in a Roth and $500K in a traditional IRA can lead to different premiums, different tax bills and different results, even with the same balance. Rules can change from year to year, so check HealthCare.gov for 2027 before you count on any subsidy.

Health costs don't end at 65 either. Fidelity estimates that a 65-year-old retiring in 2025 will need $172,500 for Medicare premiums, deductibles and prescriptions over retirement, not counting long-term care. Source: Fidelity Investments, 2025 Retiree Health Care Cost Estimate · Jul 2025

Claim at 62, or live on savings and claim later?

Few articles look at this choice: spend down your portfolio first so you can collect a bigger check later.

Take the $3,000-a-month budget and the illustrative benefits above. Ignore returns and taxes so the trade-off is easy to see:

• Claim at 62: You take $18,600 a year from savings. That's 3.7% of $500K, and you keep most of your portfolio invested.
• Bridge to 67: You take $36,000 a year for five years, about $180,000 in total. That leaves roughly $320,000. At 67, Social Security pays $2,071, so you need about $11,150 a year from savings, around 3.5% of what's left.

On paper the two come out close. The difference shows up in the risks:

• Bridging protects you if you live a long time, because the larger check is paid for life and rises with inflation. The downside is that you take big withdrawals while the portfolio is exposed to a bad market in the first few years.
• Claiming early keeps more money invested and flexible. You trade that for a smaller check that lasts the rest of your life.
• If you're married, the timing also affects spousal and survivor benefits. When the higher earner delays, the surviving spouse can end up with a bigger check.

Neither option is right for everyone. It depends on your numbers, so test both against many possible futures.

Why one number isn't enough

Every figure above assumes markets behave the same way every year. They don't.

Sequence risk is the main danger here. Say the market drops 25% in your first two years of retirement while you're also making withdrawals. Your portfolio may never recover, even if the long-term average return turns out fine. Two people with the same average return can end up in very different places.

Monte Carlo simulation is how planners deal with this. The software runs your plan through many possible market paths, good, bad and mixed. Then it counts how many of those paths keep you funded to the end. You get a probability, not a promise. Morningstar's 3.9% was judged the same way, by whether the money lasted in 90% of outcomes rather than by an average return.

Most people never get that far. EBRI's 2025 Retirement Confidence Survey found that only 52% of workers have estimated the monthly income they'll need in retirement. The other 48% are guessing. Source: EBRI/Greenwald Retirement Confidence Survey 2025, Fact Sheet 3

Run your own numbers

Three numbers: your age, your savings and your monthly spending. Monte Climb's retirement calculator runs them through 1,000 simulated futures and tells you how many stay funded. Plans run to age 95 by default, and you can extend them. The calculator runs in your browser, and nothing is saved until you choose to save it.

Want to test the claim-at-62 question or a different budget? You can ask William, Monte Climb's AI planner, "Can I retire at 62?" or "What's a sustainable spend?" He explains how he got his answer. Monte Climb is planning software, not advice.

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Frequently asked questions

How much monthly income will $500K generate in retirement?

Under the 4% rule, $500,000 supports about $20,000 in the first year, or roughly $1,667 a month. Morningstar's 2025 research puts the safe starting rate at 3.9%, which is about $1,625 a month, based on the money lasting in 90% of simulated 30-year retirements.

How much does claiming Social Security at 62 reduce my benefit?

If you were born in 1960 or later, your full retirement age is 67, and claiming at 62 permanently cuts your benefit by 30%. Claiming at 63, 64, 65 or 66 cuts it by 25%, 20%, 13.3% or 6.7%. Each year you wait past 67 adds about 8%, up to 24% at 70.

How will I pay for health insurance if I retire at 62?

Most early retirees use COBRA, a marketplace (ACA) plan, or a retiree plan until Medicare starts at 65. The enhanced ACA subsidies expired at the end of 2025. For 2026 coverage, a single person with income above $62,600 (400% of the federal poverty level) gets no premium tax credit. Check HealthCare.gov for the current year's rules.

Is $500K enough to retire at 62 if I spend $4,000 a month?

With Social Security of about $1,450 a month at 62, a $4,000 budget leaves a gap of about $30,600 a year. That's roughly a 6.1% withdrawal rate on $500K, well above the 3.9% Morningstar treats as safe. You would probably need other income, lower spending, or a larger Social Security benefit.

Does it matter whether my $500K is in a Roth or a traditional IRA?

Yes. Traditional IRA withdrawals count as taxable income, which raises your tax bill and can reduce or remove ACA premium subsidies. Qualified Roth withdrawals generally aren't taxable, so the same balance can support different spending depending on where it's held.