Installing a stereo in my garage. Suggestions?

Newly retired and eager to spend time with my woodworking hobby. Love listening to music (classic rock, classical and R&B) Limited budget (around $500). Pre-wired for two speakers in the ceiling and a sub-woofer. Source will be my i-pod or computer. No radio, no video, just music. I have a very good ear, but limited funds. What do you suggest?
I share your love of WW as well, and although I don't seem to be getting any project time lately, I do love music in the shop. I bought a Denon receiver and a pair of Energy speakers. I have speakers mounted upside down close to the ceiling and get very good bass response. I did buy them new a number of years ago from a dealer selling outdated inventory and saved some that way. But I would think you could find a good used receiver and speakers to start and build from there. I find that when I am working that the quality of music becomes a non issue as I am trying to make things fit and keep my skin intact. You may find differently but I would go for what you can afford now, and plan to build as you go.
How about headphones with noise cancellation?
Kill two birds with one stone.
I know my power saw can wail!
Ebay an amp from the late '70s - early '80s.
I just sold a nice 35WPC Pioneer integrated for $100.
Actually I use Peltor noise canceling ear muffs with AM/FM and an whole house FM transmitter. This way I can continue listening to the same music source when running equipment. Yes,the quality isn't now the level of Audeze, but I am really focusing on keeping fingers attached at those moments.
simplest thing might be to get some powered speakers like the audioengine a2 or a5 (200-350) and connect directly to ipod or computer--you can always add a sub/dac
My Audioengine 5+ powered speakers and Audioengine S8 powered sub really rock and sound audiophile quality very good. Loomisjohnson suggestion is a good one to consider!
Although this suggestion doesn't really answer your question for ceiling speakers.
focusing on keeping fingers attached at those moments.

Give the man a cigar. Safety first, always.
My garage has full range single driver kits (BK-16) from the Madisound website powered by SET amps. The sound is incredible. They also have plans for speaker enclosures if you've got the room. With all the inexpensive tube amps these days $500 could get you some nice tunes.

I use an old Sansui 9090db in the garage....they are available for about $ can connect your Ipod to the aux input...get used speakers....big and cheap.
Stalk Goodwill. Eventually, you'll find a good amp/receiver with an aux for your iPod. Of course, if it's a receiver, you can listen to the radio, too.
Since this will be in the garage, cosmetics may not be important.
Happy hunting.
I also have the Audioengine A5+ speakers and have been very impressed with their sound. The do sound much better with a real CD player compared to my iPod. I think they would be worth the risk because you can send them back.
I'd get a simple usb dac like a mytech or dragonfly and go straight into a power amp. I had a set up like this for my kitchen with in ceiling speakers and it worked great for background music.
+1 Chrshan137 I use a UDAC-2 straight into used amp. Also used V-dac, or Music streamer II into used integrated.
A Jawbone Big JAMBOX and smartphone/tablet (any Bluetooth device) streaming audio from SOMA or Rdio.