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Is $5 Million Enough to Retire at 30?


We have written before about the FIRE movement, an acronym that means “Financial Independence, Retire Early.” In a nutshell, this is the goal of working hard in your early years to build enough wealth so you can drop out of the workforce by or before middle age. Now, even for the FIRE folks, retiring at 30 is ambitious. After all, depending on your career, you may not have even started working until your mid-20s. It’s important to do your own individualized calculation of what you’ll need in retirement, taking into account a number of things. For personalized advice, consider working with a financial advisor.

Consider Your Spending

The first thing to consider when planning for retirement is your spending. Essentially, how much income do you need to replace? What will you need to spend to support your preferred lifestyle each month and each year? It’s an essential question because the early retirement formula really is quite simple. If your portfolio can generate more money than your lifestyle requires, you can afford to retire early. If not, you need to keep working and saving.

For most retirees, it’s a little bit easier to calculate spending. This is because they’ve had a lifetime to figure out their habits and their needs and because you typically step down your spending in your old age. At age 30, though, this is much more difficult to figure out. You still haven’t finished establishing your life and habits, which will all probably continue growing over the next several decades. This means you will have more guesswork than usual. Here are a few things to consider. 

Family and Dependents

Will you get married? Will have children? Increasingly, young people are getting married and having children later than previous generations. It’s become common to start a family in your 30s, which means that all of this may still be ahead of you. 

If you want to have children, make sure that your budget can accommodate the roughly $17,000 – $20,000 per year each child will cost. If you want to get married, ask whether your spouse will join you in retirement. If so, plan on the extra household expenses of another adult who has no current income. In all cases, remember that you may need a larger home to accommodate more people.

College Funds

As a coda to having children, if you do want a family to be sure to consider the costs of a college fund. The best way to think of this is through income. That is, don’t plan on just taking a bite out of your retirement account. Instead, build college fund contributions into your monthly or annual spending. Even if it all amounts to just moving numbers around on a page, you’ll be better off if you consider this money already spent than if you wait 18 years to spend hundreds of thousands of unexpected dollars.  


Where will you live? For most households, the cost of housing is their single biggest line item. This is particularly true if you live in or around a major city, which is likely for someone with the income to have saved $5 million. If you own your own home, plan for the costs of that continued mortgage. If you rent, plan for not only the costs of ongoing rent but also future rent increases. In either case, this is likely to be your biggest fixed expense, so make sure to anticipate it. 

Health Insurance 

When you retire, you lose not only income but also benefits. Now, some of these benefits won’t matter to your new lifestyle. Losing out on vacation time, for example, really isn’t relevant to someone who has just begun their life of Saturdays.

But one critical issue is health insurance. You will need to buy insurance from the individual market from now on. That is expensive and will get more expensive as you age. At 30, you can probably still get away with a relatively high deductible plan, but by your 40’s that won’t cut it anymore. Health insurance can cost around $450 per person or $1,150 for a family and that’s a monthly number. Be sure to budget for this.

Your Lifestyle 

Along with family, lifestyle is the biggest factor for young retirees. Your needs, wants and preferences are still expanding at age 30. This means that you will want relatively expensive hobbies, like travel and sports and probably want to enjoy dining out and going to events.

Again, think this through and plan for it. You absolutely do not want to retire early only to later discover that you can’t afford to do the things you love. It’s much better to work for a while longer and enjoy your life than to force yourself into decades of sitting around and waiting for something to somehow change. It’s important to err on the side of caution when factoring in your spending, especially when it comes to the lifestyle you want.

Consider Your Income and Investments

A couple with their grandparents in retirement.

If that’s the spending side of the equation, now let’s discuss where that money will come from. 

With a $5 million retirement account, the question isn’t really about how long you can make your savings last. You could take out $50,000 every year and wouldn’t run out of cash until the age of 130. Now, we don’t want to write off advances in medical science over the next century. It’s entirely possible that doctors will do remarkable things during the 21st Century. But, for the time being, we can treat a hundred-year portfolio as good enough.

Instead, the question is whether this portfolio can meet your income needs. Essentially, through wise investment and management, what kind of income can you reliably generate from this portfolio? Will that be enough to meet your spending and lifestyle needs for decades to come?

With $5 million under management, the answer is likely yes. You will not live a wealthy lifestyle, but this is more than enough money to generate a very comfortable, indefinite income. Think of it in terms of “you can fly anywhere, but you probably won’t fly first class.”

To understand this, let’s consider three basic forms of retirement assets: bonds, stocks and annuities. Note that a realistic portfolio will be diversified across several different asset classes rather than locked into one investment, but this will work for the sake of demonstration. 


Bonds are the benchmark safety investment. If you put all of your money into bonds you can generally count on a reliable income, but you won’t make as much as you would by investing in stocks.

Over the past 20 years, investment-grade and government bonds have averaged a yield of between 4% and 6%. In recent years, this has stayed closer to the 4% mark for corporate bonds. If we measure conservatively, using the 4% figure, this means that a $5 million portfolio could generate $200,000 per year in interest payments alone. This is without drawing down on your principal. 

Since we’re talking income, not returns, this is money you would generate without ever selling assets. The result is that this income would continue indefinitely.


Stocks are the benchmark growth investment. This is a good way to generate more money, but it comes at the cost of higher risk. You will have down years in which you make less and terrible years where your portfolio actually takes losses. 

On average, the S&P 500 returns between 10% and 12% per year. This means that if you put your entire $5 million portfolio into just an S&P 500 index fund, you could expect it to grow by $500,000 each year. This is just your return, without keeping any of the principal, so you could theoretically generate this level of income indefinitely. 

If you can manage that risk, typically with an emergency fund that keeps you from having to sell assets at a loss, then stocks can be a good option. If the volatility would create a problem for you, then stocks might not be a strong choice while in retirement. 


Annuities are generally considered the middle ground between stocks and bonds. This is a benchmark security asset because a lifetime annuity will guarantee you monthly payments starting at a set date and lasting for the rest of your life, but it lacks the flexibility of bonds because you cannot easily sell your annuity to recapture the underlying principal. On the other hand, an annuity tends to pay more than a bond portfolio, but less than an equivalent investment in stocks. 

With $5 million, a lifetime annuity that begins at age 30 might pay you around $19,000 per month. This comes to around $228,000 in annual income guaranteed for the rest of your life. That’s only slightly better than bonds would pay and much less than a stock portfolio would return. However, with all three of these asset classes, the result is the same. You can expect enough indefinite income to live a very comfortable, although not lavish, life. 


Finally, don’t forget about inflation. The biggest downside to security assets like annuities and bonds is that they tend to lack growth. Your income is guaranteed, which is excellent, but it can lose value year-over-year compared with inflation. At the Federal Reserve’s 2% benchmark rate, it takes about 35 years for prices to double, so expect that to happen at least once if not twice over the course of your long retirement.

This can be managed, but it will likely be through diversification. The right portfolio strategy will probably marry security and growth, in part to ensure that you have the money to keep up with prices as they change.

Social Security & Medicare

Finally, a brief note on Social Security and Medicare. For most retirees, these two programs are an essential part of retirement planning. Social Security contributes essential income, while Medicare covers important health costs. For someone planning to retire at age 30, however, neither of these programs is relevant.

You cannot qualify for Social Security until age 62 at the earliest and Medicare begins at 65. This means that you will need enough income to live comfortably for more than 30 years before you can begin collecting Social Security benefits. You will also need to pay for your own health insurance for 35 years before qualifying for Medicare.

If you can’t afford to do so, you can’t afford to retire. The same is true if you plan to coast into your 60s on financial fumes. If you plan on spending enough of your savings that, by age 65, Social Security and Medicare will be essential to your retirement plans, then the better answer is to simply work and save a little bit longer. Otherwise, when you qualify for these programs, they will be nice bonuses to an already comfortable retirement. In either case, they will not factor significantly into your plans. 

Bottom Line

A couple retiring with $5 million and their friends

If you have $5 million in the bank, you can most likely afford a comfortable retirement at age 30, but be careful. This is a lot of money, but it won’t keep you indefinitely wealthy and your life will change a lot in the coming years.

Early Retirement Tips

  • 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.
  • Is early retirement on your radar? While most of us don’t have $5 million on hand, you can still begin planning to live this dream. Let’s start with the basics in our comprehensive guide to retiring early.

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