What $2 Million in Retirement Savings Looks Like in Monthly Spending
If you’ve been diligent with your savings and managed to amass a retirement fortune of $2 million, you’ll likely be in pretty good shape for retirement. But while $2 million might feel like a lot, there are still limits on what you can spend in retirement without running out of money.
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Here’s what $2 million in retirement savings could look like on a monthly basis in retirement.
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What $2 Million in Retirement Savings Looks Like in Monthly Spending
There are several retirement withdrawal strategies you could use. While some brokers like Fidelity recommend saving around 10 times your annual salary by retirement to live on, others recommend trying to replace 80% of your income.
Most financial advisors try to help you preserve your money throughout retirement using a “safe withdrawal method” to calculate how much you can withdraw without running out of money. Probably the most popular strategy is the 4% rule, which allows you to withdraw 4% of your investment portfolio each year, adjusting for inflation. With $2 million in retirement savings, the 4% rule gives you about $80,000 a year to safely withdraw from your investments (not factoring in inflation).
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That translates into about $6,667 per month to spend, although taxes might reduce that amount, depending on how you withdraw your funds. For many retirees, this would provide a comfortable retirement income — especially if their homes are paid off and they have no outstanding consumer debt.
But if you have built a lifestyle that requires more than $6,667 per month, you might need other income sources to help fund your retirement. And chances are — if you were able to accumulate $2 million in investments — you probably had a decent income and have earned the ability to collect Social Security income as well.
If you combine Social Security income along with your investment income, this could push you over $8,000 per month, which should be more than sufficient for most middle-class retirees.
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What a Monthly Budget Might Look Like
If you use the 4% rule and withdraw around $6,500 per month and combine it with an average Social Security income of around $2,000 per month, you’ll have around $8,500 pretax to work with. And if your effective tax rate ends up being around 15%, you’ll be able to budget based on $7,225 take-home pay.