I Have $500,000 in My IRA. Is That Enough for Retirement?

The average IRA balance as of the fourth quarter of 2022 was $104,000, according to Fidelity. So if you're sitting on $500,000 in your IRA, you're clearly way ahead of the game. This especially holds true if you're not even close to the end of your career and still have time to boost your savings even more.

But do you need to push yourself to grow your retirement savings beyond $500,000? After all, that's a lot of money to work with. As such, whether you need to save more will largely hinge on your specific needs and personal finance goals.

You may want extra money

Some people earn $200,000 a year and struggle to keep up with their bills, while others manage just fine on a $75,000 annual salary. Similarly, a $500,000 IRA balance might be more than enough savings for one person and not enough for another. So before you decide to stop funding your IRA, you should determine which end of that spectrum you fall on.

A good way to do that is to consider what you want retirement to look like. If you plan to downsize your home, relocate to an inexpensive part of the country, and spend most of your time pursuing hobbies at home and volunteering in your community, you're apt to need a lot less money in retirement savings than someone wishing to retire in a large city, enjoy nightlife, and travel the globe.

Another way to determine whether you're done saving or not is to think about how much annual income a $500,000 IRA balance translates into. For years, financial experts encouraged retirement savers to follow the 4% rule, which would have you withdrawing 4% of your savings your first year of retirement and then adjusting future withdrawals to account for inflation.

Now at this point, that rule is a bit outdated. Sticking to it might cause you to deplete your nest egg prematurely. So a better bet may be to go with a more conservative withdrawal rate, like 2% or 3%.

If we meet that range in the middle and apply a 2.5% withdrawal rate to a $500,000 balance, you're left with $12,500 in annual income. That's not a ton of money when you break it down like that.

Of course, you should also expect some retirement income from Social Security. But right now, the average benefit is only $1,827 a month, or roughly $22,000 a year. That figure could change in time, but for this example, if we take that $22,000 and add $12,500, well, it's still not a ton of money. So that's something you ought to consider.

A painless way to ramp up retirement savings

You may decide that $500,000 actually is not enough money to retire on. If you want to make it easier to fund your IRA in the coming years so you're able to retire with a larger balance than that, put the process on autopilot.

Arrange for a portion of each paycheck you collect to transfer out of your checking account and into your IRA each month before you get a chance to spend it. In time, you'll stop missing that money. And you may end up pleasantly surprised at how much savings you wind up with by the time retirement rolls around.