Is $2 Million Enough to Retire?

by Ryan

$1 million just isn’t what it used to be.  With rising inflation and devaluation of the dollar, what’s a retiree to do?  Why not simply make 2!  I’ve heard, through brief conversations with several soon to be retirees, that their goal is $2 million since $1 million just simply isn’t enough.  The conversation goes something like this:

“$1 million isn’t enough to retire, so I think I need $2 million!”

Yup, that’s about as deep as it goes.  No reasoning, no questioning, just doubling of the retirement amount, and everything will be A OK.  But… is $2 million enough to retire?

Let’s pretend for a moment that we actually reach the $2 million dollar mark.  First of all, congratulations, but is it enough for you to retire on? Well there are a couple variables that change this scenario up quite a bit depending on your situation in life, which are:

-Your age
-When you pass away
-The rate of return you can earn on your money
-Inflation
-How much you plan on withdrawing yearly

Running these numbers and estimating how much you need is a bit like life insurance in that you’re taking a gamble whether you’ll live or die. A bit morbid, but true nonetheless.

The average American lives a little less than 80 years, so we’ll use that as our croak date. Next we need to determine how much interest your $2 million is making. Right now long term bonds are making roughly 5%. The historical inflation average is also about 3%.

-Age of death: 80
-Rate of return: 5%
-Inflation: 3%
-Amount left at death: 0

We can then calculate each age to determine how much you can withdraw each year:

If you’re 65: $155,650

If you’re 55: $102,440

If you’re 45: $80,004

If you’re 35: $67,819

These results, of course, are assuming you have zero left once you reach 80 and have made 2% on your money each year.

If you’d like to not touch your nest egg and live only on the interest consider the amounts below. We’ll assume these amounts are after inflation. Thus, the rate on your return would be the rate listed below, plus 3%.

Percent           Allowed Take Out
1%                       $20,000
2%                       $40,000
3%                       $60,000
4%                       $80,000
5%                     $100,000
6%                     $120,000
7%                     $140,000
8%                     $160,000

If you’d like to calculate different scenarios than described above simply use the widget below.

  • N = number of years for the investment (in this case years before death)
  • I = Interest rate – Whatever you expect to earn, minus 3% for inflation.
  • PV = Present value – Your current amount, in this case $2,000,000
  • PMT = The amount you’ll receive each year based on the other numbers, leave this blank and press the computer button under it when you fill in the other slots.
  • FV = Future value – In our example it was 0, this is simply the amount left when you pass away.


  • So is $2 million enough to retire? I think so, but my expenses are very low. Consider the lifestyle you’d like to lead, then run the numbers above to consider if you’ll have enough to pay for them until you’ve gone to a place where money doesn’t matter!

    Please remember, these are simply scenarios and estimates. Seek professional help with your retirement planning before making any major decisions.

    Another article related to this can be found at: CNN Money

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{ 4 comments… read them below or add one }

LeanLifeCoach December 26, 2009 at 3:16 pm

Ryan – Do you plan on living a hard life and giving up early?
Not long ago I read somewhere that 50% of the U.S. population born in the 80′s will likely live till they are 100!
Sadly, that’s not me but personally I am hopeful that I will last more than the 80 years of the average.
Another factor to consider is family that you will leave behind. You and I might live till 80 but what about that spouse you hope to have? Especially if you provide her an easy and healthy life, she might live till 90+. When planning for retirement we should probably plan for the best case scenario.

Ryan December 26, 2009 at 4:17 pm

Hey life coach,
I don’t plan on giving up at all! This was just me running some scenarios after I heard potential retirees question the amount they needed to retire. It wasn’t really a reflection of myself, but just to show what’s possible if you really wanted to retire and do nothing that brought in income.

Good points, I do think my generation will live longer and I didn’t factor that in, but it is important. I’m a bit leery of the idea of retirement at all, I’m a much bigger fan of finding things you enjoy doing or exploring new hobbies that you can turn into businesses. I find personalities such as Richard Branson refreshing because he’s constantly challenging himself and I don’t believe he’ll ever retire either! I’ll be writing a post in the near future about why I don’t believe in retirement, mainly because it means death!

What are your thoughts on retirement?

Darren May 18, 2010 at 11:33 am

Personally, if I had $2 million now, I think I could retire at this moment. I read an interesting book that talked about a safe withdrawal rate. If my investments earn 8% over the long term (which I think is reasonable), deduct 3% for inflation, 1% for taxes, then I can still withdraw 4% every year and still keep my principal intact.

Four percent of $2million would give me $80,000 every year, which I think I could definitely live on. I guess it depends on your current and anticipated expenses, and the kind of lifestyle you live.
.-= Darren´s last blog ..What’s More Important – Your Money Or Your Life? =-.

Moneyedup August 22, 2010 at 5:03 pm

I like the idea of retirement being all about switching gears from a demanding job to something that you really enjoy yet you can turn into a business. For example, when my uncle retired from his post as a middle manager he was able to dedicate more of his time to restoring antique cards and fishing, two hobbies which make him a lot of money. These days people are holding on to their jobs longer and longer, which is making it tough for the younger generation to get their foot in the door and start their career. Retirement is a good thing, and I plan on doing it in my 60s, then moving on to activities that I enjoy which can earn me a small income.
.-= Moneyedup´s last blog ..How To Write A Book And Publish It For Profit =-.

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