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Is $2 Million Enough to Retire at 65?


Although 65 is a conventional retirement age, reaching this point with $2 million is quite a feat. This sum can generate investment and interest income to support you well in the decades to come. However, saving this amount takes effort. And it’s crucial to allocate it properly among asset types. Plus, it’s essential to anticipate the expenses you encounter during your golden years, such as healthcare costs and taxes. Here’s how to determine if $2 million is enough to retire on at 65.

financial advisor can help you put a financial plan together for your retirement goals and needs. 

Is $2 Million Enough to Retire at 65?

Applying the 4% rule to $2 million can help you tell if this is a suitable amount. The rule means you count on your principal returning 4% and plan to live on that amount. In this scenario, your nest egg of $2 million returns $80,000 in retirement income. So, you would receive $80,000 per year without drawing on the principal, meaning it would continue to generate this amount throughout retirement. Whether it’s sufficient for retirement depends on your expenses.

The Bureau of Labor Statistics reports the average 65-year-old spends about $52,000 annually in retirement. Of course, your individual circumstances might dictate a different annual budget. However, if you fall close to this average, you can retire on $80,000 per year, especially when you factor in Social Security. That said, it’s wise to write out a budget to ensure you can afford retirement.

How to Determine How Much You Need to Retire

SmartAsset: Is $2 million enough to retire at 65?Paying for retirement with $2 million necessitates a thorough financial plan. Consider the following aspects when looking at your finances:

Estimate Your Costs in Retirement

Your monthly expenses during retirement influence your ability to retire on $80,000 per year. Your lifestyle determines monthly expenses, so it’s crucial to define every single bill or payment you’ll have in retirement.

Life Expectancy

Life expectancy is another critical element in retirement planning. For instance, if you retire at 60 and live until 90, you’ll have a 30-year retirement. Because healthcare expenses grow as you get older, they’re an indispensable item in your budget and that’s even with Medicare.

Retirement experts recommend designating 15% of your annual income to cover medical expenses. So, you would designate $12,000 per year for healthcare in retirement.

Tax Planning

In addition, tax planning is a must. Although retirement means leaving the workforce, you’ll pay taxes on most income streams in your golden years, such as savings accounts, investment income and Social Security. Specifically, traditional IRAs and 401(k)s will incur income taxes because they used pre-tax dollars from your working years. Likewise, you’ll pay capital gains taxes if you profit from the sale of stock.

On the other hand, you can prevent taxes on retirement income by investing in a Roth IRA or Roth 401(k). These accounts use the income you’ve already paid taxes on during your career. As a result, it’s vital to know which account you’re saving in and what kinds of taxes you’ll pay in retirement. Remember, you’ll also pay property taxes on your home even if you pay off your mortgage.

Estate Planning

At 65 with $2 million, you’re thinking about your family and your assets that can be used in the future. An estate plan with your family where your home or vacation home is paid off can put your loved ones at an advantage where those assets can be passed down generations and not have to begin a new mortgage on another home.

Estate planning can also help with beneficiaries in your 401(k) or an individual retirement account (IRA). Make sure that beneficiaries are up to date and percentages added need to be balanced, if necessary, to meet your family’s request.

Pinpoint Retirement Income Streams

After you get an accurate picture of your expenses, it’s time to define your retirement income. A balanced retirement budget will incorporate income from several sources:

Retirement Accounts

Your IRA, 401(k) or 403(b) is a solid base for your retirement fund. During your career, your portfolio will continue reinvesting your money and fuel its own growth as you contribute part of your paycheck. So, if you plan for your account to grow to $1 million, that takes care of half of your nest egg. Then, you can diversify the other $1 million in accounts listed below.


An annuity is a contract from an insurance company providing monthly distributions. You purchase an annuity by paying periodically or in a lump sum. After you fully fund the annuity, you receive a monthly check during retirement. For instance, a $1 million annuity can pay about $5,000 per month.

Whole Life Insurance

whole Life Insurance policy has a balance that earns interest and provides a large payment to your beneficiaries after you pass away. You can receive distributions from the policy during retirement and pay normal income taxes. Whole life insurance policies usually have an interest rate of around 2%, so you won’t receive sufficient income from this asset alone.

Bank Accounts

The recent inflation hike has raised interest rates, making high-yield savings accounts excellent assets. These accounts have interest rates of 4% and higher and don’t involve risking your nest egg in volatile stocks.

Social Security

Social Security. Your Social Security income is affected by your work history. According to the Social Security Administration, the average worker who starts collecting benefits at age 65 receives $1,690 per month. However, delaying Social Security payments increase your benefit by 8% each year, up to a maximum of 70 years. Therefore, the amount you receive from Social Security payments depends on the age at which you start collecting them.

Bottom Line

Retiring at 65 seems like a typical target, but it takes careful planning and a sufficient nest egg to pull off. If you accrue $2 million during your career, you can pay yourself $80,000 annually without touching your principal, which translates to a healthy monthly budget. In addition, your Social Security will likely range between $1,500 and $2,000, giving you more wiggle room. That said, everyone’s financial circumstances are unique. For example, if you have a chronic health condition requiring expensive care, you might need to adjust your spending habits or savings goal.  In short, retiring well means executing a detailed plan even if you have a robust investment account.

Tips for Retiring at 65 with $2 Million

  • Retiring at any age requires hard work and deliberation, and doing so at 65 is no exception. Your $2 million must provide adequate returns for you to live on, so your investment choices are paramount. Fortunately, a financial advisor can help you make optimal investments that fit your retirement plan. Finding a qualified financial advisor doesn’t have to be a headache. SmartAsset’s free tool matches you with up to three 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.
  • Timing your retirement correctly is less about a specific age than it is about getting your ducks in a row financially. The following guide can help you determine if you’re ready to retire.

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