I’m Planning to Retire at 70 With $2 Million. What Should I Think About Before Pulling the Trigger?

I’m Planning to Retire at 70 With  Million. What Should I Think About Before Pulling the Trigger?

Is $2 million enough to retire at 70?

Planning for retirement can be complicated, even with millions in the bank. Let’s take a look at some of the most common tools you can use and questions people have about retiring at 70 with a $2 million nest egg.

Consider working with a Financial Advisor as you chart a path to a $2 million retirement nest egg – or any amount, for that matter.

The 4% rule

The 4% rule can help you determine how much of your $2 million nest egg you can withdraw each year in retirement and still ensure your money won’t run out. This rule of thumb is that you can withdraw 4% from a balanced portfolio (50% stocks, 50% bonds) in your first year of retirement, then adjust withdrawals in subsequent years for inflation.

Although the 4% rule is very simplistic and your experience may differ, it can be a useful way to estimate your retirement income. If you apply that to the scenario of retiring at age 70 with $2 million in savings, the rule says you could withdraw $80,000 in your first year of retirement.

Now keep in mind that the 4% rule has many weaknesses and the outcome may vary depending on things like the composition of your portfolio and the rate of return on your investments. It is also based on historical averages and market projections. However, it can still be useful as a rudimentary tool to help you imagine how much income your savings can realistically produce each year.

Social Security and Medicare

Is $2 million enough to retire at 70?Is $2 million enough to retire at 70?

Is $2 million enough to retire at 70?

If you retire at age 70, your retirement income will likely also be supplemented by Social Security benefits. You can also get free Medicare, which kicks in for most at age 65. These programs can really help you with retirement costs.

You can use this SmartAsset Social Security Calculator to see what your annual payments could look like. The longer you wait to benefit from Social Security (until age 70), the higher your payments will be. Waiting until age 70 to apply for Social Security will increase your benefits to 132% of what they will be. full retirement age.

One thing to remember with Medicare is that even though the government helps subsidize your health care, you will still have to cover certain procedures, treatments, and medications out of pocket. According to Research 2022, a 65-year-old retired couple enrolled in Medicare should still plan to spend an average of $315,000 on health care costs during their retirement. Of course, retiring five years later might reduce some of that amount, but it’s still an expense you need to plan for.

A Financial Advisor can help you navigate Social Security and Medicare.

Lifestyle and cost of living in retirement

Some of the factors that will determine the cost of your retirement are out of your control, including your lifespan. You should consider your current health as well as the lifespan and health problems of your family members, but the future cannot be predicted, so it is best to exercise caution when financial planning.

But there are many things you can control and plan about your retirement, like where you want to live and how you want to spend your time. If you want to live in New York and travel to Europe every year, your retirement will likely cost you more than if you choose to settle in Asheville, North Carolina, and spend your time visiting nearby family.

There’s no right or wrong answer here, but you’ll need to consider your life expectancy, health and lifestyle when deciding how much is enough for your retirement.

How Inflation Could Impact Your Retirement

As inflation has risen in the wake of the COVID-19 pandemic, you’ve probably thought about how to account for it in your retirement plans. The rising cost of goods is one of the biggest problems for retirees. As the prices of goods and services increase, the purchasing power of your money decreases. In fact, the U.S. Bureau of Labor Statistics’ inflation calculator indicates that $1 million in January 2000 had the same purchasing power as $1.7 million in 2023.

Now, Social Security benefits move to some extent with inflation. But you might see painful consequences in other areas when living on a fixed income.

The best way to weather the vagaries of inflation is to ensure that your retirement income comes from diversified sources. In other words, don’t put all your eggs in one basket. While some investments, such as CDs or certain types of bonds, may suffer during times of increased inflation, some investments, such as stocks and real estate, may increase with inflation. Diversification is essential to deal with inflation.

What a $2 Million Retirement Could Look Like

Is $2 million enough to retire at 70?Is $2 million enough to retire at 70?

Is $2 million enough to retire at 70?

Let’s take a look at what retiring at age 70 on $2 million might look like for a hypothetical married couple. Using the 4% rule, you can assume they will withdraw $80,000 from their investment portfolio in their first year of retirement and then adjust for inflation. In this example, they were both born in 1985 and have an annual income of $100,000.

If they both retired and claimed Social Security at age 70, their annual payments would be $66,362 in their first year of retirement. With withdrawals from their portfolio, their total annual income would be $146,362.

When doing your own calculations, remember to deduct taxes and living expenses from this amount. Common living expenses include your mortgage or rent payments, property taxes, transportation costs, and food and medical costs. If you still have a mortgage or pay high property taxes, it may make sense to move out or move to a less expensive area if these expenses are a strain on your budget.

A financial advisor can help you determine an appropriate financial strategy for your retirement. Get matched with a fiduciary advisor today.

Conclusion

Yes, retiring at age 70 with $2 million in the bank is possible. This will require diligent planning and careful consideration of your retirement spending. If you plan ahead, you should be able to enjoy your retirement to the fullest.

Tips for Retirement Planning

  • Consider talking to a financial advisor about strategies you can use to save $2 million for retirement. Finding a financial advisor doesn’t have to be difficult. The free SmartAsset tool connects you with up to three licensed financial advisors who serve your area, and you can survey your advisors for free to decide which one is best for you. If you are ready to find an advisor who can help you achieve your financial goals, start now.

  • Diversification is key to saving for retirement, but you may be wondering how exactly to allocate your assets. This is where SmartAsset is free asset allocation calculator can be useful.

  • Keep an emergency fund on hand in case you face unexpected expenses. An emergency fund should be liquid – in an account that doesn’t have the risk of large fluctuations like the stock market. The tradeoff is that the value of cash can be eroded by inflation. But a high interest account allows you to earn compound interest. Compare the savings accounts of these banks.

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