Can I retire at 62 with $400,000 in 401k?

Quick take: what this question really means

Who this article is for

If you are near age 62 and asking whether a $400,000 401(k) is enough to retire, the short, conditional answer is this: on its own that balance usually produces modest annual withdrawals and will not fully replace typical pre-retirement income for most households unless you have other income sources, very low spending needs, or a clear bridging plan. This assessment is based on updated withdrawal guidance that many firms began using in the mid-2020s to reflect lower return expectations Morningstar analysis.

Key levers that change the outcome are withdrawal-rate choice, when you claim Social Security, health insurance and out-of-pocket medical costs before and after Medicare, and tax treatment of withdrawals. Rather than trusting a single rule, run multiple scenarios that vary those levers so you can see how fragile or robust your plan is.

Short answer and why it is conditional

A $400,000 401(k) at age 62 commonly supports initial pre-tax withdrawals in the low thousands per year unless you combine it with other income. A conservative initial withdrawal assumption materially lowers what you can sustainably take out each year, and health and Social Security choices change the income picture a lot.

Reality check: what a $400,000 401(k) typically buys you at 62

Translate portfolio size into likely first-year income under common withdrawal rules

Using simple withdrawal rules gives a quick sense of scale: a 3 percent initial withdrawal from a $400,000 401(k) is roughly $12,000 per year before taxes, while a 4 percent starting withdrawal is about $16,000 per year before taxes. Those figures are illustrative but reflect the lower withdrawal guidance that many advisory groups referenced in recent updates Morningstar analysis. See further context on withdrawal-rate studies on Investopedia.

Why the 4% rule is less certain now

The traditional 4 percent rule became popular as a simple planning shortcut, but several research teams revised guidance toward more conservative starting rates in the mid-2020s because expected long-term returns and interest rates changed. That shift reduces sustainable initial income from a $400,000 portfolio for conservative planning Vanguard research. For a plain-language view of the 4 percent conversation see Schwab.

How withdrawal strategies and safe-withdrawal assumptions affect your plan

What firms changed in the mid-2020s and why

In practical terms, many firms moved their conservative starting assumptions into a roughly 3 to 3.7 percent range in the mid and late 2020s, so someone using a 3 percent starting withdrawal from $400,000 would plan for about $12,000 in the first year rather than relying on the older 4 percent shortcut. That change reflects lower return expectations and the need for greater prudence when sequence-of-returns risk matters.

Withdrawal choice is not just a math exercise; it affects how long the portfolio can support spending. A lower initial withdrawal can reduce the chance of running short if returns are weak early in retirement, while a higher starting withdrawal increases the risk of depletion in adverse sequences. Common practical options include taking a fixed percentage each year, setting an inflation-adjusted dollar amount that you review periodically, or converting part of the portfolio into an income annuity to cover some fixed spending needs.

Fixed percentage withdrawals keep portfolio balance and cash flow linked, which can reduce the need for big adjustments after poor returns, but they also cause income to fall in down markets. Inflation-adjusted withdrawals provide steady real spending but consume principal faster in many scenarios. Partial annuitization trades liquidity and flexibility for guaranteed lifetime income and can reduce sequence risk for the portion it covers.

Whichever option you test, run multiple withdrawal-rate scenarios and include stress tests for early negative returns. Sequence-of-returns risk means that poor returns in the first five to ten years can sharply increase the probability of depletion, even if long-term averages later improve. Thinking through trade-offs and blending approaches is often more useful than choosing one fixed rule.

Social Security timing: how claiming age changes your income picture

How benefits change between age 62 and full retirement age

Claiming Social Security at age 62 provides earlier income but permanently reduces your monthly benefit compared with waiting to your full retirement age or delaying further. The decision of when to claim can be a powerful lever to increase lifetime retirement cash flow or to fill early retirement gaps, and comparing claim-age scenarios is essential before deciding to stop work

Use your Social Security statement or the official tool to compare estimated benefits at different claiming ages and combine those income streams with your withdrawal projections to test outcomes under different timing choices Social Security Administration.

Health care and Medicare: costs to model for ages 62 to 65 and beyond

Why 62-to-65 is an expensive window

Medicare eligibility in the United States generally starts at 65, so retirees aged 62 to 64 typically need private coverage, COBRA, or a spouse’s plan to avoid gaps. Those pre-Medicare insurance costs and the potential for high out-of-pocket medical spending can be a major driver of a retirement shortfall if they are not modeled explicitly Medicare.

How Medicare changes the cost picture at 65 and what remains out of pocket

Once on Medicare, many routine costs are covered differently than under private plans, but retirees still face premiums, deductibles, and supplemental costs for services and prescriptions. Use plausible ranges for pre-Medicare premiums and plan for Medicare premiums and out-of-pocket spending after 65 when you model your budget. The Consumer Expenditure Survey shows retirement-relevant spending patterns that can help you set realistic ranges for medical and other typical expenses Consumer Expenditure Survey.

Taxes, Roth conversions, and withdrawal sequencing that can improve net income

How taxes affect 401(k) withdrawals

Traditional 401(k) withdrawals are taxed as ordinary income, so your net cash flow depends on the tax bracket you occupy in retirement. Planning the timing and size of withdrawals can materially affect after-tax income and how Social Security benefits are taxed, making tax-aware sequencing a useful tool to smooth net cash flow over time.

When partial Roth conversions may help

Partial Roth conversions in years when income is relatively low can reduce future taxable withdrawals and may improve long-term net cash flow, but conversions have upfront tax costs and require planning around bracket boundaries. Consider conversions and withdrawal sequencing as one part of a broader retirement income plan and consult tax information or a professional for specifics Fidelity Viewpoints.

A simple decision checklist and scenario framework to try before deciding

Checklist items to gather

Gathering a short, consistent set of inputs makes scenario comparison practical. At a minimum collect current account balances, expected other income sources, a realistic estimate of annual spending including health costs, the health insurance options for 62 to 65 if applicable, expected tax filing status, and a life-expectancy or planning horizon assumption. Use conservative withdrawal defaults when you are unsure to see how close the plan feels to your tolerance for risk Morningstar analysis.

Once inputs are gathered, create three parallel scenarios with the same inputs except for a few levers: initial withdrawal rate, Social Security claim age, and whether you add bridge work or partial annuitization. That lets you compare outcomes cleanly and see which choices change results the most.

How to run scenario-based projections (step-by-step)

Inputs, assumptions, and conservative defaults

Start with your inputs from the checklist and pick conservative defaults to test downside risk. Common conservative defaults in recent guidance are initial withdrawal rates around 3 to 3.7 percent, Social Security claimed at later ages for one scenario and at 62 for another, and higher estimates for pre-Medicare health premiums. Explain and record each assumption so you can re-run or vary it easily Vanguard research.

How to interpret results and what to stress-test

Run at least two projections: one conservative and one moderate. Check outputs like initial annual withdrawal, projected monthly cash flow including Social Security, and probability of depletion under conservative withdrawal assumptions. Stress-test outcomes by simulating an early decade of weak returns or by raising health cost assumptions to see how robust the plan is. If a small change makes the plan fail, you need to build in a bridging strategy or adjust expectations.

Common mistakes and risks retirees with modest savings make

Over-reliance on a single rule like 4%

A common mistake is assuming a single safe-withdrawal rule will be sufficient in every future market environment. Relying solely on the older 4 percent rule without scenario testing can leave retirees exposed if returns are lower than historical averages, which is why many firms recommended more conservative starting rates in recent guidance Morningstar analysis. For further commentary on updated rules see Kiplinger.

Underestimating health or tax costs

Another frequent error is not budgeting explicitly for pre-Medicare insurance between age 62 and 65 or undercounting Medicare premiums and out-of-pocket costs after 65. These items can materially change how much you need to withdraw and when to claim Social Security Medicare.

Three practical scenarios: conservative, middle, and bridging-with-work

Conservative: delay Social Security and lower withdrawal

Conservative example: assume a 3 percent initial withdrawal from $400,000 (about $12,000 pre-tax), delay Social Security toward full retirement age or later to increase your monthly benefit, and plan for modest health costs with Medicare at 65. This minimizes depletion risk but likely requires a lower standard of living or other income to be comfortable.

Middle: mix of withdrawals and partial claim

Middle example: use an initial withdrawal closer to 3.5 percent, claim a portion of Social Security earlier or at full retirement age depending on your break-even analysis, and maintain flexibility to reduce withdrawals if returns are weak. This balances income needs now with some protection for later years, but it increases sequence risk relative to the conservative case.

Bridging: part-time income or phased retirement

Bridging with work: plan to take a lower withdrawal from the 401(k) between 62 and 65 by earning part-time income or keeping some paid work, then switch to higher reliance on Social Security and withdrawals after Medicare eligibility. Combining work with withdrawals often reduces early-sequence risk and can make a $400,000 balance more viable in practice Fidelity Viewpoints.

How to monitor and adjust your plan after you retire at 62

Regular check-ins and red flags

Do an annual review of spending versus plan, portfolio performance, and tax situation. Track red flags such as a sustained portfolio shortfall, unexpected large medical bills, or multiple years of spending above your planned amount. Early detection makes adjustments easier and less painful.

When to change withdrawal strategy or claim Social Security

Consider temporary spending cuts, partial Roth conversions in low-income years, or taking on limited paid work before changing long-term strategies. If you see a major market drop early in retirement, pause aggressive withdrawals and revisit assumptions before committing to a new long-term rate Vanguard research.

Final checklist and realistic next steps

Immediate actions to take this week

Gather your current account balances, estimate retirement spending including realistic health insurance numbers for 62 to 65, and use the checklist in this article to build three scenarios: conservative, moderate, and bridging. Check your Social Security estimates on the official site and use Medicare resources to verify likely premiums and out-of-pocket costs Social Security Administration.

Where to verify numbers and primary sources

Verify withdrawal-rate guidance and conservative defaults against recent research to set sensible starting assumptions. If you are unsure, err on the side of caution and use a lower initial withdrawal to see how much shortfall you would need to close with work, spending cuts, or timing decisions Morningstar analysis.

Short conclusion: is retiring at 62 on $400,000 realistic for you?

Retiring at 62 with $400,000 in a 401(k) can be realistic for some people, particularly those with low spending needs, other guaranteed income, or a plan to bridge the early years. For many, though, that balance alone produces modest annual withdrawals and requires careful choices about Social Security timing, health coverage before Medicare, and tax-aware withdrawals.

Run multiple scenarios, use conservative withdrawal defaults for downside testing, and consider hybrid solutions such as part-time work, partial annuitization, or delayed benefits if you need to increase long-term income security.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.