Can I Retire at 62 With $400,000 in My 401k?

So you’re staring at your 401k statement, and that $400,000 number is burning a hole in your thoughts. Can you actually retire at 62 with it? The answer isn’t just yes or no—it depends on how you live, what you spend, and what hits your budget that you didn’t expect.

First up, $400,000 isn’t a bad stash, but it doesn’t automatically mean beach days and stress-free living. Inflation alone will nibble at that pile, and the cost of everyday stuff just keeps creeping up. Even basics—like groceries, gas, or rent—aren’t what they were a few years ago.

On top of that, you’ve got healthcare. You won’t qualify for Medicare until 65. That means a few pricey years of probably buying insurance on your own, or hoping your old job offers something until then. Lots of folks don’t realize those insurance premiums can drain thousands each year if you retire before hitting 65.

• How Far Does $400,000 Really Go?
• Figuring Out Your Annual Spending
• The Magic (and Limits) of Withdrawal Rates
• Timing Social Security—and Why It Matters
• Taxes, Healthcare, and Other Sneaky Costs
• Ways to Stretch Your 401k Further

How Far Does $400,000 Really Go?

Let’s get honest—401k balances of $400,000 aren’t tiny, but they’re not exactly windfalls either when you’re looking at a retirement that could last 20 or 30 years. So, what does this number actually mean when you start using it for living expenses every month?

The classic “4% rule” is where most people start. That rule says you can safely pull out 4% of your retirement nest egg each year, and the money should last at least 30 years. With $400,000, that means about $16,000 a year, or about $1,333 per month before taxes. That's not a fortune—especially if housing or medical bills are involved.

"The 4% rule gives you a ballpark, but every retiree's situation is different. People underestimate healthcare costs and inflation." — Morningstar retirement expert Christine Benz

For most folks, Social Security is a lifeline to boost that number. But if you take it early at 62, your monthly checks are smaller compared to waiting. So, stacking $16,000 a year from your 401k with a reduced Social Security benefit can quickly feel tight if you have a mortgage or want to travel at all.

Let’s lay it out with some numbers. Check out this simple table to see how $400,000 could actually break down with the 4% and 3% annual withdrawal rates:

Of course, those numbers are before taxes. If all your 401k is pre-tax, the IRS will want their piece. So, that monthly income will drop some, depending on your overall tax situation.

If you’ve got other savings, a paid-off house, or you’re able to live simply, $400,000 with Social Security might stretch far enough. But if new expenses pop up, or the market has a rough patch, you could hit a wall pretty fast. Knowing exactly how far your money goes—on paper and in real life—is the first step before committing to any retirement plan.

Figuring Out Your Annual Spending

Here’s where the real work starts—getting brutally honest about what you actually spend each year. Guessing won’t cut it if you want your plan to work. It’s surprising how often people lowball their expenses, and that slip could blow up your plans with your 401k.

The first step? Look at your regular costs—right now. Grab three months of banking and credit card statements and add up money spent on:

• Housing (mortgage, rent, taxes, insurance)
• Utilities and phone bills
• Groceries and dining out
• Healthcare premiums and medical bills
• Transportation (car payment, gas, transit, insurance)
• Personal spending (clothes, haircuts, travel, subscriptions)
• Gifts, hobbies, and anything else that pops up a few times a year

Here’s a quick snapshot of what the average retiree household is spending per year, based on recent U.S. Bureau of Labor data from 2023:

Everyone’s numbers look different. Maybe you paid off your house—or maybe you’ll keep paying rent or a mortgage. If you plan to travel more or help out the grandkids, jot that down in a “must-have” budget. Also, think about those sneaky one-offs: home repairs, medical surprises, big purchases you’ve been putting off.

If you’re not sure, it’s better to overestimate. A good rule of thumb? Add at least 10% buffer to whatever number you come up with. It’s a lot easier to cut back later than to scramble when costs run high.

The Magic (and Limits) of Withdrawal Rates

Here's the thing: the withdrawal rate is the percentage of your 401k (plus any other savings you’ve got) that you can take out each year without running out of money too soon. Most financial planners throw around the "4% rule" because it’s the classic guideline. If you follow it, you’d pull out 4% of your $400,000 in year one—that’s $16,000—the next year you bump it up for inflation, and so on.

The math is simple, but real life isn’t always that neat. The 4% rule was created based on historical markets, and it assumes you’re investing in a mix of stocks and bonds, not just letting your money sit in cash. It also expects you’ll need your money to last around 30 years. Retiring at 62? There’s a pretty good shot you could live past 90, so you might actually need it to last longer.

Market ups and downs matter, too. If the stock market dips right when you start withdrawing, your savings could shrink faster than you expect. This is called “sequence of returns risk”—basically, getting unlucky early on can really mess with your plan.

Some advisors say consider a 3.5% withdrawal rate or even lower if you want to play it safe, especially if you’re nervous about market drops, inflation, or longer lifespans. With 3.5%, you’re looking at $14,000 your first year (before taxes), which honestly isn’t much to live on unless you have other sources of income (like Social Security, part-time work, or a paid-off house).

• Don’t forget taxes. 401k withdrawals count as regular income, so your $16,000 or $14,000 might drop a bit after the IRS takes a cut.
• Some years you might be able to take less, especially if you pick up a side hustle or delay big expenses. That can help your money last longer.
• Running the numbers every year is smart. Don’t just pick a percentage and forget it. Stuff changes—markets, laws, your health, your spending.

All in, withdrawal rates give you a starting point, but not a guarantee. This is why going lower than the classic "4% rule" gives you some wiggle room, especially if you’re retiring early or have a few big-ticket costs coming up.

Timing Social Security—and Why It Matters

If you’re thinking about retiring at 62, Social Security moves front and center. Most folks can claim it as early as 62. But—and here’s the biggie—it hits your monthly check hard if you file that early. Waiting even a few years makes a big difference in your payout.

Let’s nail down the numbers. File at 62, your benefit could be 25-30% less than if you wait until full retirement age (usually 66 or 67, depending on when you were born). Hold off until 70, and your monthly check could be a beefy 77% more than what you’d get at 62. That’s huge for anyone stretching a fixed budget. Check out the real numbers in this table:

This choice is personal, but there are trade-offs. If you need the money, you might have no choice but to file early, especially if your health isn’t great. But if you’ve got that $400,000 cushion and can wait (even just a year or two), your lifetime Social Security haul will probably be a lot bigger.

• If your family lives a long time, waiting usually means more total money.
• If you work part-time after 62, early Social Security can get docked due to the earnings test—another reason to run the numbers.
• Social Security can take pressure off your 401k, letting your investments grow a bit more.

I’ve watched people regret filing as soon as possible, just because someone at work told them “take it before it’s gone.” It’s rarely that simple. A good move is to run your own Social Security statement online or talk to a pro. See how waiting changes those numbers. It could mean the difference between scraping by and actually having some wiggle room each month.

Taxes, Healthcare, and Other Sneaky Costs

Someone says you’ve got $400,000 in your 401k and instantly wants to talk about vacations. But here’s the thing: you don’t actually get to pocket that whole number. Taxes will take a cut pretty much every time you pull money out—even if your statement looks fat.

If your 401k is traditional (not Roth), anything you withdraw gets taxed like regular income. So, let’s say you take out $25,000 in a year. That $25,000 counts as taxable income—not capital gains. Depending on your state and federal rates, you could lose 12% to 22% federal, plus whatever your state wants. People are usually surprised how fast that eats into their balance.

Healthcare is the next landmine—especially if you retire before age 65. You can’t hop onto Medicare yet, so you’re probably looking at the Health Insurance Marketplace. In 2025, the average monthly premium for a silver plan (just for one person) was around $670. That’s $8,000 a year, and that doesn’t count deductibles or co-pays. If you need insurance for a spouse, double it. Suddenly, healthcare is gobbling up a big chunk out of your yearly withdrawals.

Most people don’t budget enough for out-of-pocket health costs—things like prescriptions or dental stuff aren’t always included. And don’t forget about other "gotchas" like property taxes if you own a home, homeowners or renters insurance, possible car payments, and those unexpected home repairs. A fridge giving up on you can become a way bigger headache when you’re counting every dollar coming out of retirement savings.

Before you plan your retirement budget, go through all fixed and surprise expenses. If you have a health condition or live in a high-tax state, cushion your numbers even more. And remember, 401k withdrawals are never tax-free unless it’s a Roth and you hit the right age and rules.

• Count every medical expense—even little ones add up over 12 months.
• Research your state tax rate so you’re not shocked during your first year of retirement.
• Plan for a buffer—unexpected bills are way more common than you’d think.

If there’s one place retirees trip up, it’s definitely underestimating these "invisible" costs. Take the time to really look at what you’ll owe and spend each year so your savings last as long as you do.

Ways to Stretch Your 401k Further

No one wants their retirement money running out early. If you’ve got $400,000 in your 401k, you’ll want to squeeze every penny. Here’s how real people make it last longer—without missing out on things that matter.

First, pay attention to your withdrawal rate. Most financial planners push the 4% rule—take out 4% of your savings a year, adjusted for inflation. For $400,000, that’s $16,000 a year. But markets go up and down, and studies since 2022 show that with higher inflation, some experts now say a safer rate is even lower—around 3.5%.

Check your investments. If your 401k is still mostly in stocks, you might want to adjust so it’s not too risky but still keeps up with inflation. Brad Neal, a retirement planner in Chicago, says:

“You can’t just stick your whole balance in bonds or cash at 62. Most people need some stocks to avoid running out of money later.”

Here are a few other ways to help your money last:

• Delay Social Security if you can. Every year you wait after 62, your check gets bigger. Hold out until 67 or 70, and it could make a big difference for your long-term income.
• Work part-time for a bit. Even a few years of part-time work or gig jobs can cover basics so your 401k doesn’t take a hit right away.
• Cut obvious and sneaky costs. Shop around for cheaper health insurance (use the healthcare exchange and see if you qualify for subsidies), cut back on subscriptions, and downsize if your house is bigger than you need.
• Use catch-up contributions if you’re still earning. Folks 50 and up can sock away extra in their 401k—$7,500 more for 2025.
• Think about rolling over some of your 401k to a Roth IRA. You’ll pay upfront taxes, but later withdrawals are tax-free—a lifesaver if tax rates go up.

Try a retirement calculator once or twice a year. Plug in your real numbers: new living costs, investment returns, Social Security timing. It’s more eye-opening than any guesswork. Graham and I do this once a year, just to see if we’re on track or need to adjust. Sometimes a tiny change—like moving to a cheaper town or delaying a big trip—can keep that nest egg from fizzling out too fast.