Retiring early and making $500k last
Written by Glen James
Host of the Retire Right & money money money (formerly my millennial money) podcasts & author of The Quick-Start Guide to Investing.
I saw a great question pop up in the Retire Right Facebook group the other day and it had me thinking. A couple in their fifties (one is 53, one is 51) are pulling the pin on work mid-year and reckon they’ll walk away with $500k after selling an investment property. They’ll need that cash to live on until they can touch their super, about 7 to 9 years away. So, the big question is: how do they make that money last until they can access their superannuation?
Well, it depends. Mainly on how much they need to live on each year and how comfy they are with taking on a bit of risk.
If this couple requires, let’s say, $50k a year, that money will be mostly gone in 10 years. But if they can get by on $30k a year (tough ask, but maybe doable), they’ve got a bit more breathing room. The way things roll out also depends on whether this is a full stop on working, or just a gap year that turns into a gap decade. A bit of casual work or a side hustle later on could help keep the money ticking along. There are lots of smaller questions to ask in order to lock down the approach that is right for them.
If I were in their shoes, here’s what I’d be thinking:
Do nothing for a bit. Seriously. Pop the cash in a high-interest savings account and just breathe. Get a feel for their actual spending now that they're not working. No rush.
Split the pile. Maybe keep half in cash to cover the next 4–5 years of living, and invest the other half in a solid, diversified portfolio — something like 70/30 or 80/20. Only if they're okay with the ups and downs of the market, though.
Keep a buffer. If they're investing, don’t go all in. Have a couple of years’ worth of living expenses sitting in something safe, so they don’t have to touch the investments if the market drops.
And don’t forget tax. Earning 4.5% interest on $500k gets you about $22.5k a year. But if neither of them are working, their tax bill might be sweet. It’s still worth doing the sums and understanding how all options impact their tax situation.
If it were me, I’d probably lean towards keeping it simple: high-interest savings, draw down what you need, maybe invest a little bit for the long run if you’re feeling adventurous.
There’s no one-size-fits-all answer but remember that choosing to do nothing is also a decision. Plan it out, stay flexible, and don’t panic when markets wobble, and you’ll give yourself a good shot at cruising into retirement. Talk to the right professionals, draft out all possible scenarios and decide what aligns with you the most.
Community question
Community member says: my partner and I are in the fortunate position to have completely offset our home loan. I’d prefer to keep it open with the offset available for future renovations or investments, but my partner wants to pay it off completely and be ‘free.’ What would you do?
Glen says: First of all—massive congrats on being in such a strong financial position! That’s huge.
Now, if I were in your shoes? I reckon I’d lean toward closing the mortgage altogether. Get the title back (even if you don’t physically get it these days), throw a little celebration, and just enjoy being 100% debt-free. You can always go get debt again down the track if you really need it for renos or investing, but the peace of mind that comes from having no mortgage at all? Priceless.
Plus, you’re saving serious coin every week by not making repayments, why not stash that away for renos, invest it, or even salary sacrifice into super?
And look, sometimes you’ve got to go at the speed of the slowest soldier. If your partner’s more conservative and wants that debt-free feeling, that’s valid. In a relationship, it’s not just about what’s mathematically ‘optimal’—it’s about what feels right for both of you.
Final thought: if you can’t agree, maybe there’s a middle ground. Pay off part of the loan, leave some in offset, and keep a bit of flexibility. Either way, you’re in a great spot, so whatever path you take, you’ll be alright.
