Is It Possible to Retire by 50 If You’ve Banked $5 Million?

A lot of people don’t manage to save anywhere close to $5 million by the time they reach their 60s. So if you’ve gotten to age 50 and have $5 million to your name already, you may be in a strong position to retire early.

But is it a good idea? That depends on what you want retirement to look like and how well you’re able to manage your savings.

The challenges of retiring at 50

There are a number of issues that might arise if you opt to retire at 50. First, while $5 million is a lot of money, if it’s not managed carefully, it could run out on you. And if you’re retiring at 50, it means your money might need to last for 40 or 45 years — or more.

There’s also healthcare to consider. Medicare is not available to most enrollees until age 65. If you retire at age 50, you’ll need to buy your own health insurance for 15 years unless you have a spouse who plans to keep working and whose employer can provide health coverage for both of you.

Then there’s Social Security to think about. If you have $5 million, your nest egg is probably going to be a much larger retirement income source than the monthly benefits you receive.

But you should also know that the earliest age you can sign up for Social Security is 62. And if you’re 50 now, it means full retirement age (when you can get your monthly benefits without a reduction) doesn’t arrive until age 67. So that puts extra pressure on your nest egg for a good number of years until you start getting that extra money each month.

Considerations if you’re thinking of retiring at 50

Someone with $1 or $2 million is taking a big risk retiring at 50. With $5, it’s a lot more doable by virtue of the fact that you have a lot of money. But you’ll need to ask yourself these questions.

Do I have a lot of health issues?

If so, you may want to work a bit longer, as you may find that your healthcare bills force you to spend down your savings at a faster rate than what you’re comfortable with. On the other hand, if your health isn’t so great, it could mean that you don’t have the longest life ahead of you. So you may not need your savings to last as long as someone who’s likely to live another 40 years.

What are living costs like in my area?

In some parts of the country, a $5 million nest egg can go a lot further than in areas where costs are expensive. If you’re going to retire very early, you may want to consider relocating to an area where living costs are more moderate. It’s common to pay a premium to live in high-cost areas when you need access to good jobs. But if you’re retiring, that need goes away.

Will I be happy with my annual income?

If you’re going to retire at 50, you probably want to limit withdrawals from your savings to 3% per year, as the 4% rule would be too aggressive for a longer retirement. That leaves you with an annual income of $150,000. Whether that’s enough for you depends on your preferred lifestyle. If you want to take multiple international trips a year and live large, $5 million may not cut it — whereas it may be more than enough for a low-key lifestyle.

Do I have a family history of longevity?

If you’re in good health and you have parents who are still alive in their 90s, it means you may have a long life ahead of you. And that’s a good thing. But you’ll need to understand what that means for your savings and the risks associated with an early retirement.

Do I have plenty of savings outside of an IRA or 401(k)?

If the majority of your nest egg is in tax-advantaged accounts, you could be looking at a penalty of 10% for taking withdrawals before turning 59 and 1/2. Not only is that a waste of your money, but it puts you at risk of running down your savings sooner than expected.

Talk things through with a professional

The decision to retire at 50 is significant, even if you have $5 million to work with. So in addition to contemplating the questions above, it’s a good idea to sit down with a financial advisor and see what they recommend.

A financial advisor can walk you through different scenarios so that you understand the risks and benefits of retiring at age 50. And if you decide to move forward with that plan, they can also help you manage your savings and choose investments that are suitable for your situation.

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