If You’ve Saved $3 Million By 50, Do You Have Enough to Retire?

So, you’re 50 years old and you have $3 million. Are you ready to retire? The answer to this question isn’t necessarily an obvious one, and it also is not necessarily going to be the same answer for every single person. 

In order to determine if you are able to retire at 50 or not, you have to think about how your assets are structured, where you live, the kind of lifestyle you want to live, and what other financial commitments you may have made. Here’s what you need to know to make this important choice. 

How are your assets structured?

Having a $3 million net worth can look different for different people.

If you have most or all of your savings in index funds tracking the performance of the market, along with some safer investments like bonds, then you can live off the entire amount of that savings. As a result, all of your investments should produce income for you, and that’s going to make it a lot easier to retire. 

But, if you have a good portion of your money tied up in stock options your company gave you that you can’t sell yet, or in a house you plan to keep living in, then you may have a $3 million net worth on paper but it’s not going to do you much good when it comes to funding your retirement.

Even if you have a lot of money, the kind of account it is matters too. If you have all of your $3 million in an IRA, you can’t really access it until age 59 1/2 without incurring tax penalties. So, it doesn’t matter if it would produce enough money for you to live on — you still aren’t going to be able to stop work at 50 when you have another 9.5 years until your money can be withdrawn without penalty. 

If early retirement is your goal, you should think about all of these things as you are saving, so you can make sure you have accessible funds ready to go when you reach your target retirement age. 

Where do you live, and what lifestyle do you want to live?

Next, it’s time to think about just how expensive retirement is going to be for you. This depends on where you live and what you want to do with your days. Someone who lives in a California mansion and who wants to spend their life taking expensive cruises around the Mediterranean isn’t going to have the same income needs as a person who lives in a small Mississippi home and who wants to spend their days gardening.

Think about your current spending, how you want to change it in the future, and what non-optional costs you’ll add by retiring at 50 — including health insurance expenses for yourself and any dependents you are going to be responsible for covering once you don’t have an employer to offer you insurance anymore. 

Then, the big question will become, can you cover those expenses at a safe withdrawal rate? Experts suggest limiting withdrawals to 3.7% of your investment account balance to stand a good chance of your money lasting for at least 30 years. So, with $3 million, you could count on your investments giving you around $111,000. That’s a decent amount, but it is definitely not a lot of money if you live in an expensive area and want to live it up as a retiree. 

What other financial commitments do you have?

Finally, you have to think about your financial commitments. Do you have a mortgage to pay? Will you have car loans throughout retirement? Do you want to fund college for your kids? All of these things are going to impact how much income you need in the coming years — and thus whether $3 million is enough to retire or not.

With so much to think about, your best bet in deciding if $3 million is a good amount to retire at 50 is going to be talking to a financial advisor. An advisor can look at your current financial situation, help you define your future goals, and work with you to decide if you have enough. If you do, you can leave work with peace of mind because a professional confirmed you’re ready. If you don’t, your advisor can help you make a plan to get to that early retirement ASAP with the money you need to give you the security you deserve. 

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