Can You Comfortably Retire at 65 With $2 Million?

Reaching your mid-sixties with a nest egg of $2 million represents a significant milestone. But the real question isn’t whether you have the money—it’s whether that amount can genuinely sustain you through decades of retirement. Let’s break down the math and strategy behind making $2 million work for your golden years.

The 4% Rule: Your Foundation for $2 Million Retirement Income

The foundation of your retirement calculation starts with the 4% rule, a widely recognized framework among financial planners. This principle suggests withdrawing 4% of your principal annually, allowing the remaining 80% to continue generating investment returns.

Apply this to $2 million: you’d withdraw $80,000 per year without depleting your principal. This amount stays relatively stable throughout retirement as your investments theoretically replenish what you’ve withdrawn.

The Bureau of Labor Statistics reports that the average person aged 65 spends approximately $52,000 annually during retirement. If your spending aligns with this baseline, $80,000 provides a comfortable cushion—especially when combined with other income sources like Social Security.

Mapping Your Actual Retirement Expenses

However, relying on averages can be risky. Your personal situation demands a detailed expense analysis before you retire.

Build Your Retirement Budget

Start by listing every anticipated expense: housing, utilities, groceries, entertainment, travel, and insurance. Account for inflation’s impact, particularly on essential services. Many people underestimate lifestyle expenses or overlook occasional large purchases like home repairs or vehicle replacement.

Healthcare: The Growing Wildcard

Healthcare costs escalate significantly as you age. Retirement experts recommend budgeting 15% of your annual income exclusively for medical expenses. On an $80,000 annual withdrawal, that equals $12,000 yearly for healthcare. Remember: Medicare covers basic needs but leaves substantial gaps. Prescription drugs, specialist visits, dental care, and long-term care insurance demand careful planning.

Tax Implications You Can’t Ignore

Here’s where many retirees get blindsided: retirement doesn’t mean avoiding taxes. You’ll owe income tax on distributions from traditional IRAs and 401(k)s, since these accounts used pre-tax contributions during your working years. Capital gains taxes apply when you sell appreciated investments. Property taxes persist even on a paid-off home.

Conversely, Roth IRAs and Roth 401(k)s offer tax-free withdrawals because you paid taxes upfront. Strategically mixing account types throughout retirement can minimize your overall tax burden. This distinction alone can impact whether $2 million truly stretches far enough.

Diversifying Your $2 Million Across Multiple Income Streams

Rather than relying solely on investment withdrawals, construct a retirement income portfolio drawing from multiple sources.

Retirement Accounts as Your Core

If you’ve accumulated $1 million in traditional retirement accounts—combining an IRA, 401(k), or 403(b)—that covers half your nest egg. These accounts benefit from decades of compound growth and employer matching. The remaining $1 million can be strategically deployed across other vehicles.

Annuities: Guaranteed Monthly Payments

An annuity purchased from an insurance company converts a lump sum into predictable monthly distributions. A $1 million annuity typically generates approximately $5,000 monthly. This creates income certainty, reducing reliance on market performance.

High-Yield Savings: The New Safety Net

Recent rate increases have transformed savings accounts into legitimate retirement assets. High-yield savings accounts now offer 4% and above without subjecting your principal to stock market volatility. This serves as an emergency fund and stable income layer.

Social Security: Your Government Pension

The average worker claiming Social Security at 65 receives roughly $1,690 monthly, or about $20,280 annually. This baseline income, when combined with your $80,000 withdrawal, totals approximately $100,000 yearly—well above the national average spending level.

Crucially, delaying Social Security increases your benefit by 8% annually until age 70. If you can sustain retirement initially from your $2 million while allowing Social Security to grow, your later years become financially cushioned.

Planning Beyond the Numbers: Estate and Legacy Considerations

Retiring at 65 with substantial assets means thinking generationally. An estate plan ensures your $2 million—and any real estate—transfers efficiently to heirs without unnecessary tax complications or legal disputes.

Update beneficiary designations on all retirement accounts. Clarify which assets support your retirement and which pass to the next generation. This prevents unintended tax consequences and family conflicts.

Putting It All Together: Is $2 Million Realistic?

The answer depends entirely on your expenses, life expectancy, healthcare needs, and personal goals. Someone with modest spending and good health can comfortably retire at 65 on $2 million. Someone facing chronic illness or expensive hobbies may need substantially more.

The Action Steps:

• Calculate your realistic annual retirement expenses (not averages)
• Determine your expected Social Security benefit at your chosen claiming age
• Subtract Social Security from your annual need—this is what your $2 million must generate
• Apply the 4% rule to confirm sufficiency
• Establish a tax-efficient withdrawal strategy across account types
• Review your plan annually and adjust as life circumstances evolve

Retiring at 65 with $2 million is achievable, but only with intentional planning. The difference between comfortable retirement and financial stress often comes down to early, detailed preparation rather than luck or chance.