👴 Retiring with $5 million

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Here’s how much you need to save to retire with $5 million

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It is a dream for may Americans to have $5 million in their banks. Unfortunately, most are far from the goal.

The average net worth for people between 55 and 64 is only $1,175,900. We, however, think that this figure is not a reliable indicator and most people have even less money in their retirement fund with the average US resident 35 and under having less than $30,170 in retirement savings.

So, how much do you need to hang the boots? Americans thinks they’ll need at least $1.8 million to retire comfortably. But, you can even have $5 million if you plan it right. It all depends on how much you save and where you invest.

  • You will need to save $2,324 per month if you start at 21 and wish to have $5 million by age 67 assuming your money offers a 5% average ROI.

  • You will need to save $2,922 per month if you start at 25 and wish to have $5 million by age 67 assuming your money offers a 5% average ROI.

  • You will need to save $3,905 per month if you start at 30 and wish to have $5 million by age 67 assuming your money offers a 5% average ROI.

Also, the time needed to reach the goal will drastically reduce if you save more or increase your average returns. We think 5% is doable but many manage up to 10%, especially since stocks have been offering about 10% yearly returns on average and other asset classes like real estate also usually offer 7% returns.

The takeaway:

  • You need to start early if you want to save less per month.

  • You can reduce the amount of money needed to save per month if you can increase the return ROI. 

Note: You do not need $5 million to retire peacefully but this can be a good amount to have in your retirement fund.

We feel $5 million is doable but some might find it intimidating. It might be a good idea to start by creating smaller goals and then move to your final goal.

Is $5 Million Enough to Retire at 60?

As retirement approaches, it's common to wonder how much is enough, even if you have substantial savings. The answer largely depends on your lifestyle and specific circumstances, rather than a one-size-fits-all figure.

A typical rule of thumb suggests living on 70-80% of your pre-retirement income, but this can vary significantly based on factors like where you live. For instance, retiring in a high-cost area like Hawaii may require an annual income of around $121,228, whereas a more affordable state like Florida might need only $68,109 to maintain a comfortable life.

Where you choose to retire is a key factor in determining how far your money will go. However, it’s not the only consideration. Other crucial elements include healthcare costs, debt, lifestyle choices, and plans for travel or charitable giving. You'll also need to account for inflation, potential unforeseen expenses, and the length of your retirement.

Given these complexities, consulting a financial advisor who specializes in retirement can be a wise move. They can help ensure your $5 million nest egg aligns with your long-term goals, providing a solid foundation for a comfortable and secure retirement.

But with $5 million, it is safe to say that you’d be happy. Even if you put it in an account paying 4%, you’d have approximately $16,667 per month in interest, including taxes. ​

Check this video for some great tips:

Your IRA, made to order

Choose where and when you want to retire, and a Betterment IRA can help make your money hustle all the way there.

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Nothing in this newsletter is financial advice. Always do your own research and think for yourself.