Is $1M, $2M or $5M enough to retire? A nest egg planning check
Short answer: Whether $1 million, $2 million or $5 million is enough depends on how much you spend, how much other income you have (such as Social Security or a pension), how long retirement lasts, and what returns and inflation turn out to be. The check below shows how many years your savings could cover the gap between spending and other income under assumptions you choose. It is a planning illustration, not a prediction.
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How this works: each year the gap between spending and other income (both rising with your inflation rate) is withdrawn, then the rest grows at your growth rate. It uses a steady rate every year, so it cannot show the effect of a bad market early in retirement, and it ignores taxes. Educational only; not a recommendation.
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What is a withdrawal rate?
Your first-year withdrawal rate is the amount you take from savings in year one divided by your savings. A higher rate means savings must work harder. Planners debate what rate is sustainable; read what a safe withdrawal rate is and why planners argue about the 4% rule.
Why does the order of returns matter?
Two retirees with the same average return can end up very differently if one hits poor markets early, while withdrawals are drawing the balance down. This is called sequence-of-returns risk. See sequence-of-returns risk.
What else changes the answer?
- Taxes on withdrawals, which depend on account type
- Health care costs before and after Medicare
- When you claim Social Security
- Large one-time expenses and gifts
- How long you plan for
A planner can model these with you. See advisors who work with pre-retirees, browse retirement planning, or read retirement planning on Sam’s List.
Frequently asked questions
Is $2 million enough to retire?
It depends on spending, other income, retirement length, returns and inflation. Enter your own numbers above to see how many years savings could cover the gap.
What is a withdrawal rate?
The amount withdrawn from savings in a year divided by the savings balance. A higher rate draws savings down faster.
What is sequence-of-returns risk?
The risk that poor returns early in retirement, while you are withdrawing, reduce how long savings last even if average returns are fine later.
Does this check include taxes?
No. Taxes depend on account types and your situation; a CPA or planner can model them.
Is this a recommendation?
No. It is an educational illustration using assumptions you enter.
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