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Can I Retire at 45 with $5 Million?


If you have $5 million saved and are thinking of retiring at 45, the good news is you can certainly do so. The bigger question is how you’ll need to plan your retirement around that amount and your early retirement age. In this article, we’ll take a look at some of the common considerations for early retirement—even with a big nest egg. A financial advisor can help you plan for retirement and manage your investments.

The Cost of Retiring Early

Retiring at 45 is considered a significantly earlier retirement than normal. Since Social Security payments kick in at 62 and Medicare kicks in at 65, your retirement will begin with 17-20 years of living without the government aid many retirees to factor into their plans. And you’ll need to remember that while traditional retirement accounts like IRAs and 401(k) plans come with plenty of tax benefits, you won’t be able to access that money without a penalty until the age of 59 ½.

At 45, you could also still be dealing with costs that most retirees don’t. Are you still raising children or putting a child through college? Are you still paying off a mortgage? You’ll need to ensure that you factor those into your retirement plans.

However, with $5 million saved, you shouldn’t have an issue covering the cost of living on your own before your Social Security and Medicare kick in. You’ll just need to make sure you plan ahead.

How Far Will $5 Million Go?

retire at 45 with 5 million

The good news is even if you don’t invest your money and generate returns, $5 million is still enough that you could live on $100,000 a year for 50 years. That’ll last you until the age of 95, far beyond the average lifespan.

But with $5 million, you could also live off the interest of your investments without depleting the principal—that is, your original $5 million. While it’s best to diversify your investments, even the most conservative investments would likely generate enough for you to live on. As of April 2023, the U.S. Treasury issues 5-year notes with an interest rate of around 3.4%.  If you put your $5 million into these notes, you could receive $170,000 annually in income based on that interest rate—without ever touching your principal.

But, as mentioned above, it’s best to diversify your investments. Investment types can include tax-advantaged plans like 401(k)s and IRAs, brokerage accounts, CDs, stocks, bonds and more. Diversifying your investments allows you to manage risk by not putting all your eggs in one basket.

After all, once you retire you likely won’t have any new money coming in, so you’ll want to ensure that you’re set up so you can cover your basic costs even if the markets are down. You’re also more likely to see larger returns on some higher-risk investments, so by diversifying, you should be able to invest in high-performing assets while still mitigating your investment risk overall.

What Retiring at 45 with $5 Million Might Look Like

Once you retire, you’ll likely lose your employer-sponsored health insurance, so you’ll need to replace it. This is often one of the largest costs of early retirement as you’ll need to cover these expenses yourself for 20 years until you become eligible for Medicare.

For a single 45-year-old man living in Dallas, Texas, premiums through the website started at around $350 a month. That’s over $4,000 a year before any actual medical expenses kick in. Low-cost plans also generally come with high deductibles, meaning they have a high threshold of what you need to pay out of pocket before your insurance kicks in.

Perhaps, if you’ve invested wisely, you have quite a bit of your $5 million in retirement accounts like 401(k) plans and IRAs. While this is great for tax savings, you won’t be able to use those funds without a stiff penalty for the next 14 ½ years, so you’ll need to make sure that you’ve invested the remainder of your savings in assets that will pay off now.

If you’re thinking about those Treasury notes again, it’s not a bad impulse. Let’s say you have $2 million of your funds sitting in retirement accounts you can’t touch until the age of 59 ½. If you invest the remaining $3 million in the five-year Treasury notes mentioned above at the current rate of roughly 3.4%, you’d still be pulling in $102,000 a year.

If you want a deeper dive into what your specific retirement could look like with $5 million in the bank, sit down and look at your expenses, the lifestyle you hope to lead in retirement, your life expectancy and other factors. Then take a look at a variety of assets and investments that could fund that lifestyle while minimizing risk. If you want expert help tailored to your exact situation, consider reaching out to a financial advisor, who can work with you on a retirement plan that fits your needs.

 The Bottom Line

retire at 45 with 5 million

If you’ve saved $5 million, you should be able to retire at 45 without any worries as long as you’ve made a solid plan. With some wise investments and careful budget planning, you can have a long and happy retirement without any worries about running out of cash.

Retirement Planning Tips

  • Consider working with a financial advisor to develop a comprehensive financial plan that addresses your income needs in retirement, estate plan and more. 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 interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goalsget started now.
  • How much do you need to save to fund your eventual retirement lifestyle? If you’re scratching your head at the question, consider using SmartAsset’s retirement calculator. Our tool will tell you approximately how much money you’ll need to retire and how much you need to save each month to get there.

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