Here Is What Retiring With $5 Million at 55 Looks Like | SoFi (2024)

FAQs

Here Is What Retiring With $5 Million at 55 Looks Like | SoFi? ›

Is $5 million enough to achieve your goal? While the cost of living varies from place to place, a nest egg this size would likely give more than enough money for decades of comfortable living. Even if you live another 50 years, $5 million in savings would allow you to live on $100,000 per year.

Is $5 million dollars enough to retire on? Yes, you can retire comfortably and happily with this amount to fund your non-working lifestyle.

Data from the Employee Benefit Research Institute, based on the Federal Reserve's Survey of Consumer Finances, reveals that a mere 0.1% of retirees manage to accumulate over $5 million in their retirement accounts, whereas only 3.2% amass over $1 million.

If your money is uninvested and just sitting in cash, you should plan on saving at least $2.1 million, as that will fund your withdrawals through age 90. But if you invest your money at a 5% annual return — increasing annual withdrawals by 3% to account for inflation — you'll need to save only about $1.5 million.

So it's perfectly legal to retire in your mid-50s if that's your goal. But it's important to keep in mind that retiring at 55 isn't the norm for most people. If you're going by the normal retirement age prescribed by Social Security, for example, that usually means waiting until you're 66 or 67.

However, the general rule of thumb, according to Fidelity Investments, is that you should aim to save at least the equivalent of your salary by age 30, three times your salary by age 40, six times by age 50, eight times by 60 and 10 times by 67.

The good news is even if you don't invest your money and generate returns, $5 million is still enough that you could live on $100,000 a year for 50 years. That'll last you until the age of 95, far beyond the average lifespan.

Following this guidance, you could safely withdraw between $132,000 and $160,000 from your $4 million portfolio at age 55. That's more than three times the $42,842 that an average 55-year-old would need, suggesting your $4 million nest egg will be more than enough.

Types of High-Net-Worth Individuals (HNWIs)

The upper end of HNWI is around $5 million, at which point the client is referred to as a very-HNWI. Ultra-high-net-worth individuals (UHNWIs) are defined as people with investable assets of at least $30 million.

What is considered wealthy in retirement? ›

Super wealthy (99th percentile): $16.7 million. Wealthy (95th percentile): $3.2 million. Well off (90th percentile): $1.9 million. Middle class (50th percentile): $281,000.

What is Considered a High Net Worth in Retirement? A high-net-worth individual or HNWI is generally anyone with at least $1 million in cash or assets that can be easily converted into cash, including stocks, bonds, mutual fund shares and other investments.

Household wealth or net worth is the value of assets owned by every member of the household minus their debt. The terms are used interchangeably in this report. Assets include owned homes, vehicles, financial accounts, retirement accounts, stocks, bonds and mutual funds, and more.

For example, individuals with $1 million in liquid assets are generally classified as having a high net worth. To be considered very high net worth, one might need assets ranging from $5 million to $10 million, while an ultra-high net worth status could require $30 million or more.

How Much Money Do I Need to Retire at 55? On average, you'll need to have saved $1,051,814 to retire at 55 years old. This is based on the median earnings of Americans according to the Bureau of Labor Statistics' October 2023 Current Population Survey in weekly earnings.

The average 55- to 64-year-old doesn't have nearly enough saved for retirement. The typical household with individuals between the ages of 55 and 64 held just $185,000 in their retirement accounts in the second half of 2022, according to survey data from the Federal Reserve.

$1 million doesn't go nearly as far in retirement as it once did. In fact, a recent survey found that investors believe they'll need at least $3 million to retire comfortably. But retiring with $1 million is still possible, even as early as age 55, if you're smart about it.

If you have multiple income streams, a detailed spending plan and keep extra expenses to a minimum, you can retire at 55 on $2 million. However, because each retiree's circ*mstances are unique, it's essential to define your income and expenses, then run the numbers to ensure retiring at 55 is realistic.

That depends. How much will you spend in retirement? If you're spending £50k per year, chances are a £500k pot isn't going to last very long. For what it's worth, the average UK pension pot at 55 is around £80,000.