If you have multiple millions set aside for retirement, you may still feel a little nervous at the possibility of giving up a steady paycheck at age 50. After all, many resources that people use for retirement such as traditional retirement accounts, Medicare and Social Security won’t be available to you for years—and the last thing you want to do is be forced back into the workforce at 70. Let’s take a look at what you should consider if you’re retiring at 50 with $10 million.
If you’d like individualized help planning for retirement, consider working with a financial advisor.
Is $10 Million Enough to Retire at 50?
Even under very dire circumstances, there’s almost no way that $10 million isn’t enough for you to retire at 50. Even if you parked the money in a checking account and didn’t use it to generate further returns, you could live on $200,000 a year for 50 years before you ran out.
And even conservative investments like certificates of deposits (CDs) and Treasury securities can offer a meaningful income flow with that amount.
A well-planned investment portfolio will bring in a significant amount of income without eating away at your principal and set you up for as long as you live—and then leave plenty to pass on to your loved ones.
That said, flagrant spending, unexpected financial hits and other challenges could eat away at a large sum pretty quickly. Let’s take a look at some of the most common considerations for even a well-funded retirement.
Prepare for the Unexpected
While $10 million is a lot of money, retiring at 50 means you can plan on approximately 40 years of retirement if you expect to live to around the average age. Even if nothing catastrophic happens to you or the economy in the meantime, inflation alone can make a dent in what you can expect from your savings.
According to the U.S. Bureau of Labor Statistic’s inflation calculator, $50,000 in April 1993 had the same buying power as about $105,000 thirty years later. That means in 30 years, the value of your savings could be halved.
Health challenges and medical bills can also add up quickly, especially if they happen before you’re eligible for Medicare. According to Fidelity, the average couple who retires at 65 in 2022 should save about $315,000 for health care alone—and that’s with Medicare.
While that’s a small portion of $10 million, you can see how medical care costs could quickly spiral and eat away at even large retirement savings.
One of the quickest ways you can shed money during retirement is by living beyond your means. Have a plan for how you’re going to spend your money in retirement and stick to it.
If you want to spend lavishly in retirement, that’s completely possible with $10 million. As mentioned above, even without investment income, you could easily spend $200,000 a year and not worry about your money disappearing before you die.
If you want to eat out at fine restaurants and buy nice clothes, that’s easily within your grasp.
But of course, European vacations, multiple homes, a rare car collection or any number of things could drain your bank accounts very quickly. Use SmartAsset’s budget calculator to make sure you have a sound plan for your spending in retirement.
The Importance of Diversification
You may have already gotten the sense that it’s better to invest your $10 million than to just have it sitting in a checking or savings account. By investing your money wisely in a variety of assets, you can set yourself up for success.
Diversification means not putting all your eggs in one basket. Let’s say that you leave your $10 million in a checking account, not generating interest, while you plan to live on $200,000 a year.
If your bank happened to be Silicon Valley Bank, which failed earlier this year, you’d be getting $250,000 back from the FDIC insurance. In other words, you’d be high and dry.
The same basic principle applies to investing: Don’t put all your money in one place. By diversifying where you put your money, you can minimize risk while still generating great returns.
Generally speaking, high-risk investments generate more money, while low-risk investments offer lower returns. By diversifying your investments, you can have liquid resources, keep your risk relatively low, find ways to beat inflation and more.
Wise Tax Planning
You’ll still pay taxes in retirement, so make sure you understand what you need to plan for. Social Security benefits, pension income and investment income can all be taxed. Even distributions from tax-advantaged accounts like a 401(k) are taxable.
Taxes don’t have to impact your retirement as long as you plan for them. After all, the penalties and fees that can come with not filing your taxes correctly can add up fast and make a bigger dent in your savings than taxes would have in the first place.
Get Ahead of Estate Planning
The age of 50 may seem young to start making decisions about preparing a will. But there are negative outcomes if you don’t plan ahead. If you don’t have a plan in place, the state may seize control of your assets. This means that they may not go to who you intend them to.
Besides creating an estate plan (and revisiting it regularly), FINRA notes that gifting assets before death can benefit both you and the recipient.
Even when retiring early, $10 million should make your retirement years quite comfortable. By making sure you prepare for factors you can’t control—like inflation, medical surprises and taxes—you can clock out for good at 50 without any worries.
Retirement Savings Tips
- A financial advisor can help you take care of your finances when you’re retired. 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 goals, get 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. This 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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