Moneywise
6 min read
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The good news is that a $2 million nest egg is not too shabby and can sustain you for the rest of your life as long as you don’t spend it irresponsibly.
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Gen X — people between the ages of 45 and 60 — have an average of $589,4000 saved in their 401(k)s as of the fourth quarter of 2024, according to a Fidelity Investments report. So by this account, you’re doing better than most if you have $2 million in retirement savings.
But is it enough for you to spend $150,000 a year? Probably not. The life expectancy of Americans is about 77 years, and you’ll want to plan for longer than that.
There are a number of factors to consider while making the math work for early retirement.
The 4% rule is one of the most popular ways to figure out how much you can spend each year in retirement. It says if you withdraw 4% of your balanced portfolio (50% stocks, 50% bonds) in the first year, with subsequent amounts adjusted for inflation, your retirement savings should last you 30 years. But of course, there are no guarantees and some experts have warned retirees about this rule.
So if you have a $2 million retirement portfolio, you can withdraw $80,000 the first year. This is a little more than half the $150,000 you’re looking to spend a year. You would need a nest egg worth almost $4 million to safely withdraw $150,000 a year, per this rule. Your safe withdrawal rate would be even lower if you considered a longer retirement horizon, like 35 years or 40 years.
Talking to an expert can help you figure out exactly how much you can withdraw from your nest egg each year without worrying about your funds running out later.
You can match with a vetted financial advisor near you for free with Advisor.com.
Once you answer a few basic questions about your financial situation and goals, Advisor.com will comb through its database to find a FINRA/SEC-registered advisor best suited to help you.
Advisor.com’s network of financial experts are all fiduciaries, meaning they are required to act in your best interest. Plus, there’s no asset minimum to work with an expert on Advisor.com, not even a dollar.
