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According to Schroders, Americans who participate in workplace retirement plans believe they need about $1.28 million to retire comfortably (1). So if you had almost double that, or $2 million, it’s safe to assume you’d retire soon.
But for some billionaires, giving up their career and regular income isn’t easy. Older workers may aim to get “a little bit more” before leaving the workforce for good. You may have a deep-seated fear of running out of money, which is why you continue to work longer than you originally planned.
But here are three reasons why you should consider retiring as soon as you hit the $2 million milestone, and four ways to keep your hard-earned money after your paycheck ends.
According to the World Health Organization (WHO), life expectancy in the United States is 76.4 years, so you might think it’s worth sacrificing a few extra years to work more in your late 50s or early 60s (2).
After all, you have plenty of time to enjoy the fruits of your labor, right? Well, the WHO also reports that health-adjusted life expectancy is even lower, at just 63.9 years on average.
This means that if you retire at age 60, you may only have a few years of complete health before chronic illness or functional limitations set in. Beyond that point, you can gradually lose energy, mobility, and the desire to travel and enjoy time with family.
This sacrifice may be justified if you risk falling into poverty in retirement. But if you have $2 million in your portfolio, it doesn’t make much sense to continue working and trading the healthiest parts of your golden years.
Read more: Robert Kiyosaki warns of a ‘Great Depression’ that would push millions of Americans into poverty. Was he right?
According to LongTermCare.gov, approximately 60% of Americans will need some type of assistance as they age (3). And annual care costs can be high, reports SeniorLiving.org (4):
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$75,756 for assisted living facilities;
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$80,300 for home health aides;
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$118,104 for a common room in a nursing home.
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$135,528 for a room in a private nursing home.
It’s understandable to worry about the cost of care as you get older, but that doesn’t necessarily mean you need to keep working to cover those costs. Instead, consider protecting your assets by planning ahead.
GoldenCare’s long-term care insurance covers nursing home, assisted living, home health care, and more, so you don’t have to pay out-of-pocket and deplete your $2 million nest egg.
All you have to do is enter some simple information about yourself. Golden Care offers free quotes on long-term care insurance that fits your needs and budget.
Based on the standard 4% rule, $2 million could support many retirees comfortably, depending on spending and market conditions.
According to data from the Bureau of Labor Statistics, the average American household spends about $78,535 annually. However, this figure includes all age groups and families who are raising children and paying mortgages or rent. Averages can also be heavily skewed by outliers and the wealthiest Americans and their spending habits.
Retired empty nesters typically have lower expenses. In fact, households between the ages of 65 and 74 spend about $65,354 annually, nearly $13,200 less than the average (5).
Applying the 4% rule to $2 million would result in annual withdrawals of $80,000. This does not include social security benefits or company pensions. Simply put, $2 million might be enough if you want to live a normal life.
However, if your lifestyle is more expensive or highly discretionary, this may not be the case.
Ultimately, you have to ask yourself how much is enough and what kind of lifestyle you are comfortable maintaining.
Even if you’re planning a modest retirement, it’s important to have enough cash to maintain a healthy emergency fund.
Conventional wisdom says you should keep three to six months’ worth of living expenses on hand for a rainy day, but retirees should aim to have 18 to 24 months’ worth of living expenses, reports AARP (6).
After all, you will no longer be able to earn a salary, and as you get older, you are more likely to have emergencies. Look at the difference between average life expectancy and average healthy life expectancy. Having cash on hand to weather life’s storms can be an important part of your retirement strategy.
High-yield accounts like the Wealthfront Cash Account are a great place to grow your uninvested cash, with competitive interest rates and easy access to your funds when you need them.
The Wealthfront Cash Account currently offers a base APY of 3.30% through the program bank, and new customers receive an additional 0.75% boost on up to $150,000 for the first three months, for a total variable APY of 4.05%.
According to the FDIC’s March report, this is 10 times the national savings rate (7).
Additionally, Wealthfront enables direct deposits into cash accounts (minimum $1,000 per month) and offers new customers who open and fund a new investment account an additional 0.25% APY increase with no expiration date or balance limit. That means the APY can reach 4.30%.
There are no minimum balances or account fees, and with 24/7 withdrawals and free domestic wire transfers, your funds are always accessible. Additionally, you can qualify for up to $8 million in FDIC insurance through Program Bank.
Opening a certificate of deposit (CD) is also a smart way to grow your emergency fund. CDs allow you to lock in your rate up front, so your income is locked in for a period of time even if market rates drop.
If you’re looking for this kind of predictable, reliable growth, platforms like CD Valet can help you find high-yield options that will help you in retirement.
Here’s how: CD Valet tracks over 40,000 verified rates from FDIC-insured banks and NCUA-insured credit unions nationwide. And unlike other websites, we display all published rates, giving you a comprehensive view of the market.
Plus, CD rates are continually updated, making it easy to buy, compare, and open CDs.
Keep in mind that the combination of rising health care costs and an uncertain market can make it difficult to stretch out even a $2 million nest egg to enjoy a comfortable retirement.
But when you join a senior-focused organization like AARP, you can save money and maintain your retirement lifestyle with discounts on everything from prescriptions and dental plans to travel, entertainment, and insurance.
One of the most trusted organizations for older Americans, AARP not only offers money-saving benefits, but also helps you make informed financial and health decisions.
AARP members have access to guides that help you maximize your Social Security benefits, choose the right Medicare plan, and uncover other government benefits, potentially saving you thousands.
Sign up for AARP today and get 25% off your first year.
According to Empower (8), Americans typically achieve billionaire status in their 50s and 60s. If you are in your 60s with $2 million, your life expectancy could be around 20 years, depending on your health status and gender, according to actuarial tables, based on conditional life expectancy data rather than the 76.4-year figure measured from birth (9).
To put this in perspective, assuming zero investment income and no additional sources of income, you would need a budget of $125,000 per year to burn through $2 million within 16 years. In reality, a diversified portfolio usually involves some risk, but it yields returns over time.
Simply put, under typical market conditions, you can enjoy a six-figure lifestyle with a reasonable margin of safety. For the average couple with nothing, this may be more than enough, especially when you factor in Social Security benefits.
To be fair, some very wealthy people have a strong desire to leave behind a legacy. A large inheritance may provide financial security for your loved ones.
That’s a perfectly legitimate goal, but it’s not mandatory. You’ve spent decades earning, saving, and sacrificing to build this wealth. In the final chapter, if you want to spend your money on experiences, travel, comfort, and a fulfilling life, that’s equally valid.
There’s no rule that says your bank account has to outlive you. Money is always useful in your life, not the other way around.
Whatever your money goals, if you want to leave a large legacy, it’s wise to develop a financial plan for retirement, including a strategy to grow your $2 million portfolio.
A financial advisor can help you crunch the numbers and come up with a plan that works, but it’s important to find a professional you can trust.
That’s where Advisor.com can help. This platform connects you with nearby experts for free.
Advisor.com does the heavy lifting for you, vetting advisors based on track record, customer ratios, and regulatory background. Additionally, their network includes fiduciaries, who are legally required to act in your best interests.
Just enter a few details about your finances and goals, and Advisor.com’s AI-powered matching tool will connect you with qualified professionals who best fit your needs.
Even better, you can schedule a free, no-obligation consultation to discuss your retirement goals and long-term financial planning. This way, you can make sure you’re on the same page before considering what happens next.
With $2 million, you can probably maintain a six-figure lifestyle for many years. Results will depend on the market, inflation, and longevity, but the financial odds are generally in your favor at that level of wealth.
Bottom line: Although you can continue to work after your assets reach $2 million or more, you may not need to for compelling financial and personal reasons.
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Schroeder (1); World Health Organization (2); LongTermCare.gov (3); SeniorLiving.org (4); U.S. Bureau of Labor Statistics (5); AARP (6); FDIC (7); Empowering (8); Social Security Administration (9)
This article is for information only and should not be construed as advice. PROVIDED WITHOUT WARRANTY OF ANY KIND.