Personal Finance

My parents are in their 60s with $500k saved for retirement and will get $5k per month from Social Security - how much can they spend every month?

Maurie Backman

Published: January 20, 2025 8:17 am

The median retirement savings balance among Americans in their early to mid-60s is $185,000, according to Federal Reserve data from 2022 (the most recent available). Now that figure may be a bit higher at this point thanks to the fantastic year the stock market just had.

But all told, the typical near-retiree doesn’t have a ton of money saved. So when I came across this Reddit post, I thought to myself, “The couple here is not in bad shape at all.”

The poster is asking what amount of money his parents can afford to withdraw from their savings and spend per month. They’re 63 and 64 with a $500,000 balance in their retirement account. But they’re also going to be getting more than $5,000 a month from Social Security.

Based on the details the poster shared about their parents, the truth is that they may not even need the money from their retirement savings to cover their expenses. But it’s still important to have a plan.

It’s important to manage savings wisely

The couple above is in an interesting situation in that they’re looking at a pretty large Social Security benefit relative to their income. And it may be that the reason they’re getting so much from Social Security in retirement is that they’re planning to delay their claim beyond full retirement age. For each year you do, up until age 70, your monthly benefit gets to grow 8%.

The poster says their parents never made more than $75,000 a year. So if they’re getting more than $60,000 a year from Social Security, it means that they may not even need to tap their nest egg to cover their basic expenses.

However, that doesn’t mean they won’t want to use their savings from time to time. It may be that this couple lived frugally for decades and now wants to take the opportunity to travel, fix up their home, or do other things they previously put off. So it’s certainly not unreasonable for them to take withdrawals from their savings — they’ve earned it.

That said, one thing this couple doesn’t want to do is deplete their nest egg too soon. So they’ll need to know how much money they can safely withdraw on an annual basis.

To that end, there are different strategies that can be employed. The 4% rule is a popular one, which would have this couple taking out 4% of their $500,000 balance, or $20,000, their first year of retirement and then adjusting future withdrawals to account for inflation.

However, some critics say the 4% rule isn’t as universally sound as some might think it is. The rule’s success in preventing savings from running out hinges a lot on how savings are invested and how the market performs, among other factors. So a safer withdrawal rate for this couple might 3%, which would give them about $15,000 to spend on extras like vacations or home improvements each year.

It’s best to get customized advice

I think this couple has a lot going for them in retirement. They’re used to living on a modest income, so they may be able to get by on just their generous Social Security payday.

I’d encourage this couple to leave their nest egg for as long as possible, since they don’t know how long they’ll live or what the future has in store. But I’d also say that this couple should treat themselves to things they perhaps didn’t spend their money on earlier in life, like travel, while their health is still strong enough to support it.

Most importantly, I’d tell this couple, and anyone else with money-related concerns relating to retirement, to consult a financial advisor. An advisor can review their personal financial details and help them come up with a plan to manage their savings. An advisor can also help them prioritize their retirement goals so they’re able to spend their money on things that really matter.