Ultimately, whether you have enough to retire depends on your costs and your income.

If you can live on a tight budget with the right circumstances, $2,000 a month from a pension and Social Security, combined with the right strategy with $500,000 in your Roth IRA may be enough to sustain you throughout your retirement. But it’s important to consider the opportunity cost between retiring now and working and investing for a few more years, as it may determine your quality of life in retirement.

Your retirement plan depends on your specific circumstances. Talk to a financial advisor about your goals today.

Weighing the Opportunity Cost of the Next Few Years

Steve Davis, CEO of Total Wealth Academy recommends waiting a few years to shore up your retirement portfolio at this point, in order to let your Roth IRA and Social Security benefit grow.

“The average female lives 18.5 years in retirement. That is less than $2,000 a month from the IRA or $4,000 a month total. That is not enough for the basics let alone romance, travel, and fun… [Instead] I would pull the money out of the IRA, leaving maybe $400,000. Get it invested in income producing assets.”

“I would also keep working until 70 at least, to buy additional assets before retiring to get that up to about $10,000 a month [because] $12,000 a month would be a pretty high quality of lifestyle in retirement,” he told SmartAsset.

There are three important issues here:

1. By retiring early you are giving your portfolio less time to grow and will spend more time making withdrawals.

2. A $500,000 Roth IRA is a small portfolio. Using the 4% rule, it can only generate $20,000 per year/$1,667 per month. This is tight for an individual and probably unworkable for a couple.

3. You are not maximizing your Social Security. At age 62, you will receive 70% of your total potential benefits each month, cutting your lifetime income significantly.

Remember, you may need to finance a long life, and you may incur unexpected expenses during retirement. A $1,667 monthly rate of withdrawal will last 25 years, taking you to age 87. That leaves you less than $4,000 per month in total, with the realistic possibility of that portfolio running out.

For many people, this is not a good plan.

A financial advisor can help you develop a sustainable retirement plan.

How To Fix A Small Portfolio

As Davis suggested, you actually are in a good position to retire, just not to retire early. With a few more years, you can have a very comfortable retirement.

Maximize Your Social Security

We don’t know how your monthly income is distributed between pension and benefits, but on average a retiree collects $1,793 per month in full Social Security benefits. Retiring at 62 would reduce that by 30% to $1,255. So we assume a $1,255 Social Security payment and a $745 pension.

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If you wait until age 70 to retire, your benefits will increase to 124%. That would boost an average payment to $2,223. Add your pension, and you have a $2,968 monthly income. That alone is almost as much your entire income at 62, without even considering your Roth IRA.

Grow Your Portfolio

Your Roth IRA has two key advantages. First, by not paying taxes on your withdrawals you functionally increase the value of this account by 6% to 11% on average. Second, right now it has hit its era of peak growth. Maximize that.

Let’s assume you contribute nothing extra to this portfolio and leave it in an S&P 500 index fund, with the market’s average annual return of 10%. If you wait until age 70 to retire, this portfolio could be worth as much as $1.07 million. If you take a slightly more conservative approach, investing in 60% stocks and 40% bonds, you might expect an 8.7% rate of return and a final portfolio of $974,555.

These numbers can fuel a very comfortable retirement. For example, say you took that entire $974,555 and bought a lifetime annuity on your 70th birthday. That could generate a $7,321 monthly income. Add in your benefits and pension and you can retire on $10,289 per month.

Yes, eight more years is a long time to work and wait. But your retirement will be even longer. With just a little more patience, you can make it a great one. Discuss your plan with a financial advisor to find the most efficient path to retirement.

Bottom Line

You have half a million dollars in a Roth IRA and $2,000 in a pension and benefits. You are close to a fantastic retirement, but at age 62 you likely aren’t quite there yet.

Retirement Income Tips

• Annuities are an interesting product. On the one hand, they can cost you some potential gains. You’ll get less from an annuity than you might from the market. On the other hand, they guarantee you an income for life, which is a promise you can’t get from any other investment class. So… are they right for you? 

• A financial advisor can help you build a comprehensive retirement plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

• Keep an emergency fund on hand in case you run into unexpected expenses. An emergency fund should be liquid — in an account that isn’t at risk of significant fluctuation like the stock market. The tradeoff is that the value of liquid cash can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.

• Are you a financial advisor looking to grow your business? SmartAsset AMP helps advisors connect with leads and offers marketing automation solutions so you can spend more time making conversions. Learn more about SmartAsset AMP.

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The post I Have $500k in a Roth IRA, and Will Receive a Combined $2,000 a Month From a Pension and Social Security. Can I Retire at 62? appeared first on SmartReads by SmartAsset.