is $2 million enough to retire

Is $2 Million Enough To Retire? Here’s How to Find Out

You may be evaluating your retirement plans and finances and wondering if you can live comfortably on a $2 million nest egg. With a high inflation rate and the cost of living soaring, a $1 million retirement account certainly doesn’t stretch as far as it used to. Whether or not $2 million will be enough to retire ultimately depends on your retirement goals. 


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What’s Your Annual Income Requirement?

According to AARP, a good rule of thumb to use when estimating the amount of money you need after quitting work is 80% of your pre-retirement income. With the end of payroll deductions like Social Security, 401(k) retirement plan, other savings plans, and work-related expenses, the assumption is that 80% of their income is a reasonable amount to live on. 

Pre-Retirement Income80%Years $2 Million Will Last (years)

The above calculation is a very basic approach and doesn’t consider inflation. If inflation is high and rises, the cost will increase, and retirees may need to withdraw more from their savings. 

Another approach is to use the 4% rule of thumb, which states that you can withdraw 4% of your total retirement savings in the first year of retirement. The 4% rule of thumb is derived from the 1998 Trinity study, in a paper titled “Retirement Spending: Choosing a Sustainable Withdrawal Rate.”

If you have $2 million, that will amount to $80,000. The following year, the withdrawal amount can be adjusted for inflation. If inflation were 5% in year two, you would withdraw $84,000 ($80,000 x 1.05%).

Is $2 Million Enough Money to Retire?

Now that you know the amount of money you can withdraw from your retirement savings account, the question remains as to whether or not $2 million is sufficient. You need to assess a few factors before you can make this judgment. 

The Cost of Living


Inflation periodically rises like in 2022 and with a high inflation rate, the cost of goods and services will keep rising. Retirees will need to tighten their budgets and increase their withdrawal rate from their savings if inflation continues to grow.  


Where retirees live can have a significant impact on their wallets. The most expensive states to live in were determined after analyzing the median house and ownership cost, cost of living, medicare advantage, and state medicare spending per person. The study concludes that the most expensive states to retire in are Hawaii, Colorado, Oregon, Washington, Massachusetts, Vermont, New Jersey, Connecticut, New Hampshire, and Minnesota. If you live in these states, you may run through your $2 million savings faster than retirees living in less expensive states. 


Retirement life doesn’t necessarily mean that people reduce their expenses. With more time on their hands, retirees may look at spending more money during retirement on hobbies, socializing, and traveling. How you want to live your life post-retirement is another important reason for sharing your goals with a financial planner. You must realistically assess your financial position and lifestyle choices before retiring. If you need more savings to fund your post-retirement lifestyle, you may need to delay your retirement by a few more years. 

Market Risk

In early 20220, the Nasdaq and S&P 500 Index fell for seven weeks straight, while the Dow Jones Industrial Average (DJIA) dropped for eight consecutive weeks. The markets took a tumble as a result of skyrocketing inflation and in response, interest rates. 

There is an inherent risk in the stock market, and many retirement savings plans and pensions have been affected. Losing value in your investments can significantly delay retirement plans or even bring you out of retirement and back into the workforce. 

It’s vital for people planning for retirement to regularly evaluate and rebalance their portfolios to keep their money insulated from market risk as much as they can. 


Although we can’t predict a personal health crisis or injury or our life expectancy, retirees must put money aside for medical expenses. People looking to retire early need money set aside for healthcare expenses because Medicare isn’t available until age 65. 

A Fidelity Investments report called Retiree Health Care Cost Estimate concluded that an average retired couple at age 65 needs approximately $300,000 after-tax savings to cover their health care expenses. 

Planning Your Retirement

Work with a certified financial planner to discuss your investment strategy, risk tolerance, retirement goals, and income streams to ensure that $2 million is enough to retire. Lay out your dream retirement, including significant purchases and travel aspirations. This will give your advisor a better picture of how you can reach your goal of saving $2 million for retirement. It will also help them design an asset allocation and mix of investment vehicles like stocks, annuities, and index funds that can help grow your savings. 

A financial advisor can also evaluate when it’s best to tap into your Social Security benefits. Although you can start receiving Social Security retirement benefits as early as age 62, delaying them until age 70 will increase the amount. However, the earlier you use your retirement benefits, the longer you will receive them, so it helps to complete a risk-benefit analysis. 

Another helpful planning tool is a retirement calculator. You can find retirement calculators online or use one with a financial planner. You can also complete a Monte Carlo simulation to plan for retirement. The simulation will predict different outcomes by inputting different variables and hypothetical situations. It can advise how much money is safe to withdraw from your retirement savings plan over time and whether taking early retirement is possible.  

Monte Carlo simulations allow users to input income, expenses, inflation rates, life expectancy, and more. The retirement calculator and simulation are not exact science, but they provide good information to help with retirement planning. 

Is $2 Million Enough to Retire Comfortably?

With careful retirement planning, $2 million can be enough to save for retirement. The earlier you start saving for the future, the easier it will be to reach your $2 million financial goal for your retirement savings plan.

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Nadia Tahir is a freelance writer and content creator. She mostly writes in the areas of lifestyle and personal finance. She also enjoys writing on her blog about motherhood at This Mom is On Fire.

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