Retiring with $400,000 might sound impossible these days. Groceries are still pricey, housing isn’t getting cheaper in many places, and healthcare costs can drain your savings fast.
But here’s what’s changed in 2025: High-yield savings accounts and CDs are paying more, Social Security cost-of-living adjustments have bumped up benefits, and more retirees are embracing flexible, low-cost lifestyles.
That means retiring with $400,000 isn’t out of reach — it just takes a clear-eyed plan, smart spending, and the willingness to adapt.
Why $400,000 could work in 2025
For many, $400,000 may not sound like enough, but it depends on your spending, income sources, and where you live. In 2025, yields on some high-yield savings accounts are still near 4.00% APY, and CDs can hit 4.00%-4.50%, giving your cash a chance to grow.
If you can pair your $400,000 with Social Security and potentially part-time income, you may not need to rely as heavily on your nest egg each year.
The lifestyle piece
If you plan to retire on $400,000, you’ll need to keep your annual expenses modest — think $30,000 to $35,000 a year, adjusted for your Social Security benefits. That means:
- Living in a low-cost state or even abroad
- Downsizing your home
- Driving a paid-off car
- Prioritizing needs over wants
These decisions can be hard to make, especially if you’ve never done it before. Don’t be afraid to seek out professional help. This no-cost quiz from our partner, SmartAsset, makes it easier to find a fiduciary financial advisor.
Healthcare will be your biggest challenge
Healthcare can derail a tight retirement budget. If you’re under 65, private insurance can be expensive, but Affordable Car Act (ACA) subsidies may help if your income is low.
Consider:
- Building up a health savings account (HSA) while you’re working
- Exploring ACA marketplace plans with subsidies
- Planning for Medicare premiums and out-of-pocket costs
Inflation isn’t done with us yet
Prices for many essentials remain elevated in 2025, and your $400,000 today will buy less in the future if you aren’t invested wisely. Keeping a portion of your portfolio in stocks and inflation-protected assets will help maintain your purchasing power.
Withdrawal strategy: slow and steady
A conservative withdrawal rate (around 3%) will help your $400,000 last longer, especially if paired with Social Security and any part-time or hobby income.
Using a bucket strategy — cash for near-term needs, bonds for stability, and stocks for growth — can reduce your risk of selling investments in a down market. And you don’t have to make these decisions alone. A short questionnaire from our partner, SmartAsset, helps match you with up to three fiduciary financial advisors, each legally bound to work in your best interest.
Is $400,000 realistic for you?
Retiring with $400,000 in 2025 isn’t easy, but it’s not impossible. It requires:
- Living below your means
- Leveraging Social Security and possibly part-time work
- Smart investing and a clear withdrawal plan
- Being willing to adjust spending as needed
If you’re aiming for $400,000, start by tracking your current spending, estimating future expenses, and checking your Social Security timeline. You may discover you’re closer to retirement than you think if you’re willing to adjust your lifestyle.
Great Job newsfeedback@fool.com (James McClenathen) & the Team @ The Motley Fool Source link for sharing this story.
