How to Retire With $5 Million

Even with $5 million saved, managing your retirement nest egg wisely is essential to ensure it supports both your needs and lifestyle goals throughout your retirement years. Proper planning can help that wealth last for 20 to 30 years or more. To make the most of your savings, consider strategies that balance income generation, growth and risk management. You can also consider working with a financial advisor to create a personalized retirement plan — one that aligns with your goals, adjusts for inflation and provides clarity and confidence as you move into the next phase of life.

The Importance of Having a Financial Plan

The first and most critical step in managing a $5 million retirement portfolio is creating a clear financial plan. This is something many retirees, even high-net-worth individuals, often overlook.

According to Northwestern Mutual’s Planning & Progress Study, 33% of U.S. adults don’t feel financially secure, up from 27% in 2024, with 37% planning to cut back on discretionary spending in 2025.

And when it comes to retirement, 64% of those with an advisor feel financially secure, compared to just 29% who don’t have a financial advisor, highlighting the difference working with a professional can make as your enter your golden years.

A solid financial plan begins with building a retirement budget. This step will help determine whether your $5 million can support the lifestyle you envision over the next two to three decades. Your budget should cover core living expenses — like housing, food, transportation, utilities and healthcare — as well as discretionary costs such as travel, hobbies, charitable giving and family support.

To get started, take a close look at your current spending. Track your expenses for at least six months, then ask yourself:

Will my current spending patterns carry over into retirement?
Which expenses might increase, decrease, or disappear altogether?
Are there new categories I’ll need to plan for, such as higher healthcare costs or more frequent travel?

This exercise will provide the insight you need to estimate your annual spending needs and determine a safe withdrawal rate from your portfolio. A commonly recommended approach is the 4% rule, which suggests withdrawing no more than 4% of your retirement assets annually to preserve wealth over time. With a $5 million portfolio, this would allow for a first-year withdrawal of $200,000. From there, you may adjust based on inflation, lifestyle changes and portfolio performance.

Creating this roadmap early, and working with a financial advisor to refine it, can help ensure your retirement savings work for you throughout your retirement, not just at the start.

Consider Downsizing

There are several reasons to considering downsizing. It reduces your expenses. Mortgage payments or rent are lower. Continuing expenses like insurance, maintenance, repairs and property taxes are less in a smaller residence.

It may reflect your decreased need for space to live in retirement. Perhaps you had children who needed space to play and enough room for all your memories to grow. But as a retiree, your children will likely have homes of their own.

You may even be considering downsizing for your health and mobility. After all, falling is a major hazard for those 60 and older; living in a one-story home promises fewer risks than a multi-story property for those in retirement.

Move to Save

A husband and wife discussing how to retire with $5 million.

If your estimated retirement budget exceeds your expected retirement income, you may consider relocating to a more affordable area to reduce expenses. When evaluating budget-friendly retirement spots, consider:

Median housing costs
Cost of renting vs. buying
Median healthcare costs
Access to healthcare
Crime rate
Recreation and amenities
Location, weather and climate

Compare which states are the most retirement-friendly and fit into your price goals. For example, the cheapest states to buy a home centralize in the mid to southeast region of the U.S. The top four include West Virginia, Arkansas, Alabama, and Mississippi. However, looking at the states with the lowest taxes, Florida is a big contender with cities like Tampa, Jacksonville, and Miami, partially thanks to its lack of income tax. Neither list really intersects, which shows the varying benefits a state may have. On one hand you’ll have lower taxes, on the other cheaper housing. There are even five states that have done away with statewide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon.

Alternately, you might look into heading overseas. Malaysia, Panama and Slovenia and consistently rank among the cheapest places to retire, while enabling you to soak up a new culture. But if you’re planning an overseas retirement, be sure to do your research. In addition to considering the cost of living, check any legal requirements for establishing residency in your chosen country. Weigh your options for healthcare and look into potential tax implications associated with claiming Social Security benefits or withdrawing money from investment accounts from afar.

Make Sure Your Money Keeps Working for You

Money should never retire. It’s tempting, for example, to keep your funds in a standard checking account. It’s a separate location to store your money. But instead of simply putting away your money, you could dedicate some of it to investment. One of the easiest ways is with a savings account. They’re usually a low-risk, low-yield option, but you can improve your earnings with a high-yield savings account instead. Compared to a savings account that offers an interest rate between 0.01% and 2%, high-yield savings accounts typically have interest rates from 1% to 2.2%. A higher interest rate will also help you keep up with inflation. Look for one with low fees.

Alternatively, there are money market accounts, which are a compromise between a checking account and a savings account. They allow you to access and withdraw your money but still earn a higher interest rate. A high-yield money market account may earn nearly 2% in interest.

And these are only two savings opportunities you can use to build money passively. Other investment options may work better for your long-term goals, so consider the risk level and yield you want.

Eliminate Credit Card Debt

Avoid unnecessary debt. Pay off the entire balance due each month on credit card debt. Interest rates well above 20% are not uncommon. If you’re hit with a big charge consider taking out a personal loan. These usually have lower interest rates and premiums than credit cards. By getting rid of your credit card debt, you will create new financial opportunities. You can put that money towards your retirement savings and help bulk up your funds.

Bottom Line

A husband and wife envisioning their dream home after retiring with $5 million.

Having $5 million at the end of your working years creates a financial cushion. You can live a comfortable life, enjoy yourself along the way, bounce back from the occasional unexpected costs and leave something for your loved ones or favorite charities. The key is to have a financial plan, predicated on a realistic budget. After that consider downsizing or moving – or both. Make sure your funds are working hard for you and keep a lid on unnecessary and excessive debt.

Retirement Tips

Consider talking with a financial advisor who can help you work through retirement planning issues. Finding one doesn’t have to be hard. SmartAsset’s match-up tool pairs you with up to three local advisors in just a few minutes, making finding the right help the easiest part of your retirement planning. If you’re ready, get started now.
Use a retirement calculator and Social Security calculator to estimate how to allocate your $5 million, or whatever the amount is. If you experience a major life change, run the new numbers through the retirement calculator for an updated outlook.