Can I Retire at 65 with $5 Million? (2024)

Retirement planning has many elements, but there are two questions that must be answered before anything else can be addressed: What age do you plan on retiring? And, how much money do you need saved to retire at that age?

Many people plan on retiring later, but 65 remains a popular target age. Another popular retirement savings goal is to have $5 million stored away. Let’s break down if that will be enough to make your retirement sustainable andthe factors that you will have to keep in mind.

For help figuring out your own retirement savings strategy, consider working with a financial advisor.

Can I Retire on $5 Million at 65?

While there are a few questions you’ll need to answer before you can know definitively, the quick answer is that you can certainly retire on $5 million at age 65. Though you may have to make some adjustments, depending on your lifestyle.

There are three basic factors you need to figure out when you’re determining if you have enough money saved for retirement:

• Growth rate. Your retirement savings ideally is not sitting idly in a savings account, but is invested in the stock market or other securities, growing in value. The higher growth rate you have, the longer your money will last. In fact, if you have a high enough growth rate and low enough withdrawal rate, in theory your money will last forever.

• Drawdown rate. This is the rate at which you withdraw on the principal. As noted above, it would be great to live off of interest and growth only, but for most people that’s simply not possible.

• Withdrawal rate. This is the flat dollar amount you’ll need to take out each year. Your withdrawal rate obviously has a direct impact on your drawdown rate.

Growth Rate Basics

If you want your $5 million to last as long as possible when you retire at age 65, you’ll need to make sure it keeps growing while you’re retired. You can do this with a smart, tactical asset allocation strategy.

Most people start tapering their portfolio towards fixed-income when they get close to retirement; this is because these investments are less risky. The problem, though, is that fixed-income investments generally aren’t delivering high returns. You’ll need to find the right balance to protect your cash while also having a high enough growth rate.

Withdrawal and Drawdown Rate Basics

These two figures are grouped together because they are intimately related. One of the key things you’ll need to when planning your retirement is to figure out how much money you need each year. Generally, it’s recommended that you plan on taking out about 80% of your pre-retirement income.

There are ways you can lower your drawdown rate, though. You could downsize your home to lower your housing costs; you could even move to a more affordable place if you want to lower your overall cost of living. You can also make more simple budget cuts, like going out to dinner less.

One thing you shouldn’t forget to factor in is healthcare costs. As you get older, you’ll likely have more healthcare needs, but you’ll also have access to Medicare. Make sure you account for this.

Figuring Out If You Can Live on $5 Million at Age 65

Here’s how you can actually figure out if that $5 million is enough for you to survive on in retirement. First, look at your investments and see what your likely growth rate is. If you have a financial advisor working with you, they can likely help you figure this out.

Next, figure out how much money you’ll need to withdraw each year. From there, it’s fairly simple math to see how long you can take out your needs each year before the pot runs dry, given your return rate.

Bottom Line

Whether or not you can retire on $5 million at age 65 depends on a number of factors, most prominently how much money you need to take out each year to live and how much growth you can get out of your investments. You’ll need to figure both of these out before you know for sure if that money will last you through the end.

Retirement Planning Tips

• A financial advisor can help you make sure your retirement plan is solid. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

• Use SmartAsset’s free retirement calculator to see how much you’ll need and if you’re on track.

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