Is $5 Million Really ‘No Man’s Land’ for Retirement? My Thoughts on Polarizing Opinions

A Reddit user is tackling a controversial question head-on. He’s posted in the “Chubby FIRE” forum, which is for people who want to achieve Financial Independence and Retire Early (FIRE) but don’t want to do so just by being very frugal. Instead of living on less to be able to retire early, Chubby FIRE followers want to have a good amount of money so they can enjoy life. 

The controversial question the poster is asking is whether $5 million is enough to enter into Chubby Fire territory. The poster said he has seen split opinions on that, with some who say $5 million is plenty and others who express doubts about whether it is sufficient and instead feel like you’d be in “this purgatory where you can’t really live it up in retirement but have “just enough” to be comfortable.”

So, what’s the answer? Is $5 million plenty, or will it leave you feeling like you always have to watch your budget? 

Is it really controversial to say $5 million is enough to retire?

The original poster (OP) pointed out in his thread that if you asked most of the general population whether $5 million was good enough to retire, they’d “laugh in your face.” And, he’s very likely correct about that. Most people do not have $5 million or even close to that amount. In fact, the median 401(k) balance among seniors 60 and up is $210,724 according to Empower.

However, most people are not trying to retire at a young age like people in the FIRE Movement are. Further, many of the people who are in this movement tend to earn a pretty high income — and that changes the equation.  

If you earn a few hundred thousand dollars per year, you likely make life commitments that center around that income level — and you get used to having the financial freedom that provides. Once you’ve set this standard, it does become controversial to determine if $5 million is enough or not, because it depends on just how much income you personally need to be able to continue to live the lifestyle you have been enjoying. 

How to decide if $5 million is enough

The replies to the Reddit poster’s question clearly demonstrate the very controversy that he’s talking about — some of the posters think that $5 million is plenty, and others said having that little money creates a lot of financial uncertainty.  And, while the poster may be frustrated about the conflict between these answers, the reality is that it exists because the question of retirement readiness is such a personal one.

The best and only way to determine if $5 million is sufficient is to calculate how much income you need to live the life that you want as a retiree– and then to determine if $5 million can provide that amount at a safe withdrawal rate.

Experts now suggest that a safe withdrawal rate is 3.7%, so $5 million would give you an income of $185,000 per year. If that’s enough, then $5 million is good. If you feel like you’d always be limiting yourself and your budget would be too constrained with $185,000 per year to spend, then you need to invest more.

A financial advisor can help you to do these calculations and try to figure out both the income you’ll need to feel secure and what nest egg you must have to provide it. Your advisor will also help you create a path towards building that nest egg if you haven’t already — so get this financial advice ASAP to get started on your path to whatever your Chubby Fire number might be.

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