I'm Retiring With $500,000 in the Bank. Am I Set for Life?

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The average amount of retirement savings among Americans aged 65 to 74 is about $609,000, according to the Federal Reserve. But the median individual retirement account (IRA) or 401(k) balance among that age group is only $200,000.

If you slept through Statistics 101, you should know that when you have a median that's way lower than an average, it tells us that the median is likely a more representative number for the sample set you're working with -- in this case, Americans aged 65 to 74. In fact, the reason the average savings balance is so much larger than the median is that a small group of people with giant nest eggs are likely raising the average.

If you're retiring with $500,000, your nest egg vastly surpasses the median savings balance among older Americans. And you're also not so far off from the average. But is $500,000 enough savings for you? Well, that depends.

It's a matter of lifestyle and choices

It's hard to say whether a $500,000 nest egg is enough money for your retirement or not because that really depends on you. If you intend to retire and live in a costly city, go out often, and travel to foreign countries three times a year, it may not be. But if you plan to downsize your home, live in a more affordable part of the country, and take one big trip per year, that's a different story.

The tricky thing about saving for retirement is that there's no single magic number that guarantees you'll have enough money to cover all of your bills and do everything you want. So you'll need to try to establish a retirement budget that outlines your personal expenses.

Say you have $500,000 and decide you'll manage it with the popular 4% rule. (The rule says you should start by withdrawing 4% of your savings balance your first year of retirement and then adjust future withdrawals for inflation.) That gives you about $20,000 in annual income from your savings. You may also be eligible for another $28,000 a year in Social Security benefits, bringing your total annual income to $48,000.

If, based on the lifestyle you're imagining, you think you can live on $4,000 a month, then you should be all set with $500,000. If you think you'll need a larger monthly income, then you'll need to address that.

How to boost your savings before your retirement

Although a $500,000 nest egg is nothing to scoff at, it's okay to admit that it's not quite enough for you. If you're eager to boost that balance, take these steps:

• Make sure you're taking advantage of making catch-up contributions to your IRA. Once you turn 50, you can contribute $8,000 a year instead of $7,000.
• Work a couple of years longer than expected. You don't necessarily have to stick to your current job if it's stressful. But working a little longer in some shape or form lets you add to your savings while leaving your existing nest egg untapped.
• Make sure you're not letting a penny of your 401(k) match go unclaimed. Even if you don't like your employer's plan, contribute enough to get your match in full.

There's nothing wrong with retiring with $500,000, and you may be able to thrive on a nest egg of that size. But if not, be honest with yourself. And take steps to give your savings a lift.

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