Planning for retirement
Can I Retire at 62 With $400,000 in My 401(k)?
Maybe. At the withdrawal rates the research supports, $400,000 pays roughly $1,000 to $1,700 a month before tax, so whether you can retire at 62 comes down to what you spend, what Social Security adds, and how you'll pay for health insurance until 65.
Key points
- A 4% first-year withdrawal from $400,000 is $16,000, or about $1,333 a month.
- Claim Social Security at 62 and your check is 30% smaller for life than at 67, if you were born in 1960 or later.
- Medicare starts at 65. Retire at 62 and you need three years of other coverage.
- Traditional 401(k) withdrawals are taxed as income, and they count toward the income limits for health insurance help.
- Working longer, claiming Social Security later, part-time income and lower spending can each change the answer.
What $400,000 pays per month
Start with the withdrawal rate: the share of your savings you take in the first year. After that, the usual method is to raise the dollar amount with inflation each year.
The well-known figure is 4%, from financial planner William Bengen's 1994 research. Morningstar's most recent estimate for new retirees, published December 3, 2025, is 3.9%. Both assume the money needs to last about 30 years. Our guide to the 4% rule and the 7% rule explains where the numbers come from.
| First-year withdrawal rate | Per year from $400,000 | Per month | What the research says |
|---|---|---|---|
| 3% | $12,000 | $1,000 | Cautious; below published estimates |
| 3.9% | $15,600 | $1,300 | Morningstar's estimate, December 2025 |
| 4% | $16,000 | $1,333 | Bengen's 1994 rule of thumb |
| 5% | $20,000 | $1,667 | Higher chance of running short over 30 years |
| 7% | $28,000 | $2,333 | Not supported for a 30-year retirement |
These are before-tax amounts, and none is guaranteed. They rest on past returns and on forecasts.
So $400,000 alone covers about $1,300 a month. Few people can live on that, which is where Social Security comes in.
Social Security at 62 versus 67
You can claim at 62. It costs you. For anyone born in 1960 or later, full retirement age is 67, and the Social Security Administration's reduction table shows a 30% cut for claiming at 62. A $1,000 benefit at 67 becomes $700.
The cut is permanent. Wait past 67 and the check grows 8% for each year you delay, up to age 70.
Say your statement shows $2,000 a month at 67:
- Claim at 62: $1,400 a month
- Claim at 67: $2,000 a month
- Claim at 70: $2,480 a month
Each of those rises with yearly cost-of-living adjustments.
For scale, the average retired-worker benefit was $2,087.52 a month in August 2026, according to the SSA's Monthly Statistical Snapshot. That's an average across everyone, whatever age they claimed. Yours could be far above or below it. Your own number is in your "my Social Security" account at ssa.gov.
Putting the two together
Take the $2,000-at-67 example. Retire and claim at 62, withdraw 4%, and you'd have about $1,400 plus $1,333. That's $2,733 a month, or roughly $32,800 a year, before tax and before health insurance.
If your house is paid off and you spend $2,500 a month, the numbers work on paper. If you rent in an expensive city and spend $4,500, they don't.
A spouse changes the picture too. A second Social Security check, a pension, or a spouse who keeps working with health coverage can each turn a tight plan into a workable one.
The health insurance gap before 65
Medicare eligibility starts at 65. Leave work at 62 and you've got three years to cover, and this is the cost people most often leave out.
The main routes:
- COBRA. You keep your employer's plan for a limited time and pay the full premium yourself.
- The Health Insurance Marketplace. Losing job-based coverage opens a special enrollment period that runs from 60 days before to 60 days after your coverage ends, per HealthCare.gov.
- A spouse's employer plan, if there is one.
- Retiree coverage, if your employer offers it.
Marketplace premiums depend heavily on income. For 2026, the IRS says the premium tax credit is available to households with income from 100% to 400% of the federal poverty line. For 2026 coverage, 400% works out to $62,600 for one person and $84,600 for a household of two in the 48 contiguous states. For 2027 coverage, which uses the 2026 poverty guidelines, the lines are $63,840 and $86,560 under the law as it stands. Go a dollar over and the credit is gone.
Your 401(k) withdrawals count as income for this test. A large one-time withdrawal for a roof or a car could cost you the credit for the year.
Taxes on 401(k) withdrawals
Money from a traditional 401(k) is taxed as ordinary income in the year you take it. At 62 you're past 59½, so the 10% early withdrawal penalty doesn't apply.
When the plan pays you directly, it has to withhold 20% for federal tax. That's a prepayment. You settle up when you file, and you may get some back. Roth 401(k) money is different: qualified withdrawals come out tax-free.
How much tax is there on small withdrawals? Often less than people fear. For 2026 the standard deduction is $16,100 for a single filer and $32,200 for a married couple filing jointly, per the IRS. A single person whose only income is a $16,000 withdrawal would owe no federal income tax.
Social Security complicates it. Part of your benefit becomes taxable once your "combined income" (half your benefits plus your other income) passes $25,000 for a single filer or $32,000 for a couple, according to the SSA. Bigger withdrawals can push you over. Your state may tax withdrawals too.
The four levers
If the first pass comes up short, these are what you can change.
Work longer
Each extra year adds to savings and shortens the stretch they have to cover. If you're still contributing, the 2026 contribution limits include a higher catch-up amount for ages 60 to 63.
Delay Social Security
You can retire at 62 without claiming at 62. Some people live on savings for a few years so the lifelong check starts bigger. In the example above, waiting from 62 to 67 means covering $1,400 a month from savings for five years, about $84,000, in return for $600 more every month for life, with inflation adjustments on the larger amount. Whether that trade suits you depends on your health, your spouse, and how long your savings can carry you. Our guide to retirement age lays out the claiming ages.
Part-time income
Even $1,000 a month from part-time work equals a 3% withdrawal from $400,000. One catch if you've already claimed: for 2026, Social Security withholds $1 of benefits for every $2 you earn above $24,480 if you're under full retirement age all year. Once you reach full retirement age, the SSA recalculates your benefit to credit the months it withheld.
Spend less
Housing is the big one. Paying off a mortgage, downsizing, or moving somewhere cheaper can take a large bite out of what your savings have to cover.
Run your own numbers
- Add up a year of real spending from bank and card statements. Include insurance, property tax and car repairs.
- Add health insurance for ages 62 to 65, using an actual quote.
- Look up your Social Security estimates at 62, 67 and 70.
- Subtract Social Security (and any pension) from spending. The remainder is your gap.
- Divide the gap by your savings. Near 4% or under is in the range the research supports. Well above it means pulling one of the levers.
Our retirement calculator does steps four and five for you and lets you test different ages. How much do I need to retire? works from a spending target instead. For a comparison with others your age, see average retirement savings by age. Our step-by-step retirement planning guide puts the rest of the pieces in order.
Before you leave the job, also decide where the 401(k) will live. Our guide to your 401(k) choices at retirement compares staying in the plan with rolling to an IRA.
Common questions
Is $400,000 enough to retire at 62?
It can be if your spending is modest and Social Security covers a large share of it. At a 4% withdrawal rate, $400,000 provides about $1,333 a month before tax. Add your own Social Security estimate, subtract health insurance and taxes, and compare the result with what you spend.
How long will $400,000 last if I retire at 62?
It depends on how much you take. At $16,000 a year rising with inflation, the 4% rule's historical testing found savings lasted at least 30 years. At $28,000 a year (7%), the arithmetic gives about 14 years if the money only keeps pace with inflation, and about 20 years if it earns 3.5% a year above inflation. Past results don't guarantee future ones.
How much do I need to retire at 60?
There's no single figure. A common shortcut: take the yearly amount you'll need from savings and divide by 0.04. Needing $40,000 a year points to about $1,000,000. At 60 you also face two years before Social Security can start and five before Medicare, and a retirement longer than the 30 years the 4% rule assumes.
Can I retire at 55 with $1 million?
At 4%, $1 million pays $40,000 a year before tax. A retirement starting at 55 could run 35 or 40 years, which calls for a lower rate than research built on 30 years. You'd also need ten years of health coverage before Medicare, and a way to reach the money before 59½, such as the rule of 55.
Should I take Social Security at 62 or live on my 401(k) first?
Claiming at 62 preserves savings and locks in a check that's 30% smaller for life, for people born in 1960 or later. Drawing on savings first shrinks the account and buys a larger inflation-adjusted check later. Your health, marital status and savings all bear on it, so it's a good question for a fee-only planner.
Does money in a 401(k) reduce my Social Security?
No. Withdrawals from retirement accounts don't count as earnings under Social Security's earnings test. They can make more of your benefit taxable.
We base our guides on primary sources such as the IRS, the Department of Labor, and federal regulators. Read our editorial policy. Spot an error? Tell us.
