Is $2 Million Enough to Retire On? Ask These Questions to Find Out

As of 2022, Americans between the ages of 65 and 74 had a median $200,000 in retirement savings. And if that sounds like it’s not a lot of money, well, it isn’t.

A $2 million nest egg, on the other hand, buys you a lot more options. With $2 million, you might be able to live quite comfortably and have plenty of money left over for surprise expenses that inevitably arise.

But is $2 million enough for you? Ask yourself these questions to find out.

1. What will my essential expenses look like?

A lot of people assume that their expenses will drop in retirement. And yours might, to some degree.

But there will always be expenses like housing, transportation, food, utilities, and healthcare that you’ll need to pay for. So it’s important to do an honest assessment of what those look like.

If you’re fairly close to retirement, you can probably estimate those expenses with relative ease by combing through recent bills. If you’re still a good five to 10 years away or more, you may need to do some educated guessing. But it’s important to establish that baseline to see how well a $2 million nest egg might hold up.

2. Can I trim expenses without being unhappy?

It may be that some of the expenses you anticipate having in retirement can be lowered. If you’re willing to downside into a smaller home, for example, you might slash costs like homeowners insurance, property taxes, and maintenance. And if you’re able to go from a two-car household to a single car, that helps shed a lot of expense, too.

But you also have to be realistic when you think about trimming expenses. If downsizing will mean moving to a new part of town where you don’t have friends close by, that could impact your quality of life in a negative way. So it may be worth it to pay your $12,000 annual property tax bill and $2,500 homeowners premiums, even if it’s possible to cut those costs and stretch your savings further.

3. What are my ultimate retirement goals?

A $2 million nest egg might do the job of covering your recurring living costs. It might also be enough to manage unpleasant financial surprises, like needing to replace your roof or have transmission work done on your car.

But it’s also important to think about what you want to do with your time in retirement, and how much your plans might cost. If you never got to travel much when you were working and raising kids, and you now want to take three long international trips a year in retirement, you might need more than $2 million to pull that off when you also factor in your recurring expenses.

But then again, you may have dreams of a simpler retirement — one where you spend time volunteering and helping to look after your grandkids. In that case, you may find that $2 million will more than suffice.

Ultimately, the amount of retirement savings you need to enjoy your senior years depends on you and you alone. While $2 million may be more than enough for some people, if it’s not enough for you, there’s nothing wrong with that. But it’s important to know what sort of nest egg to aim for based on your wants and needs.

To that end, it’s a good idea to sit down with a financial advisor. A professional can help you estimate the cost of your dream retirement so you can come up with a savings goal to target. They can also help you take steps to reach that goal over time.

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