If you’ve set aside several million for retirement, you may still feel a little nervous about the possibility of giving up a steady paycheck at age 50. After all, many resources people use for retirement, such as traditional retirement accounts, Medicare, and Social Security, won’t be available to you for years to come — and the last thing you want is to be forced back into the workforce at age 70. Let’s take a look at what to consider when you retire at age 50 with $10 million.
If you want individualized help with retirement planning, consider working with a financial advisor.
Is $10 million enough to retire at age 50?
Even under very difficult circumstances, it’s almost impossible that $10 million isn’t enough to retire at age 50. a year for 50 years before you ran out.
And even conservative investments like certificates of deposit (CDs) and Treasury bills can provide a meaningful income stream at that amount.
A well-planned investment portfolio will generate a significant amount of income without eating away at your principal and set you up for as long as you live – then leave enough to pass on to your loved ones.
That said, blatant expenses, unexpected financial setbacks, and other challenges can eat into a large sum pretty quickly. Let’s look at some of the most common considerations for even a well-funded retirement.
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Prepare for the unexpected
While $10 million is a lot of money, retiring at age 50 means you can retire in about 40 years if you expect to live around the median age. Even if nothing catastrophic happens to you or the economy in the meantime, only inflation can put a dent in what you can expect from your savings.
According to the U.S. Bureau of Labor Statistics inflation calculator, $50,000 in April 1993 had the same purchasing power as about $105,000 thirty years later. This means that in 30 years the value of your savings can be halved.
Health challenges and medical bills can also add up quickly, especially if they happen before you become eligible for Medicare. According to Fidelity, the average couple retiring at age 65 in 2022 would need to save about $315,000 for health care alone — and that’s with Medicare.
While that’s a tiny fraction of $10 million, you can see how medical care costs can add up quickly and eat up even large retirement savings.
One of the fastest ways you can lose money in retirement is to live beyond your means. Make a plan for how you will spend your money in retirement and stick to it.
If you want to spend lavishly after retirement, that’s totally possible with $10 million. As mentioned above, even with no investment income, you can easily spend $200,000 a year and not worry about your money disappearing before you die.
If you want to eat out in good restaurants and buy nice clothes, it is within reach.
But of course, European vacations, several houses, a collection of rare cars or any number of things can drain your bank accounts very quickly. Use SmartAsset’s budget calculator to make sure you have a good plan for your expenses when you retire.
The importance of diversification
You may have already begun to feel that investing your $10 million is better than just leaving it in a checking or savings account. Investing your money wisely in different assets will help you achieve success.
Diversification does not mean putting all your eggs in one basket. Let’s say you leave your $10 million in a checking account, accruing interest, while you plan to live on $200,000 a year.
If your bank were Silicon Valley Bank, which went bankrupt earlier this year, you’d get $250,000 back from FDIC insurance. In other words, you would be high and dry.
The same basic principle applies to investing: don’t put all your money in one place. By diversifying where you put your money, you can minimize risk while still generating great returns.
In general, high-risk investments yield more money, while low-risk investments yield lower returns. By diversifying your investments, you can have cash, keep your risk relatively low, find ways to beat inflation, and more.
Wise tax planning
You’ll still pay taxes when you retire, so make sure you understand what to plan for. Social Security benefits, retirement income, and investment income can all be taxed. Even distributions from tax break accounts like a 401(k) are taxable.
Taxes don’t have to affect your retirement, as long as you plan for them. After all, the fines and fees that can come with not filing your taxes properly can quickly add up and put a bigger dent in your savings than taxes would have done in the first place.
Get ahead with estate planning
The age of 50 may seem young to make decisions about drafting a will. But there are negative results if you don’t plan ahead. If you don’t have a plan, the state can take control of your assets. This means they may not end up with who you intended them to be.
In addition to creating an estate plan (and reviewing it regularly), FINRA notes that gifting assets for death can benefit both you and the recipient.
It boils down
Even if you retire early, $10 million should make your retirement years pretty comfortable. By making sure you prepare for factors beyond your control, such as inflation, medical surprises, and taxes, you can clock out at 50 for good without worry.
Tips for retirement savings
A financial advisor can help you manage your finances in retirement. SmartAsset’s free tool pairs you with up to three vetted financial advisors serving your area. And you can interview your advisor matches for free to decide which one is best for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
How Much Should You Save to Fund Your Eventual Retirement Lifestyle? If you’re scratching your head over the question, consider using SmartAsset’s retirement calculator. This tool roughly tells you how much money you need to retire and how much you need to save each month to get there.
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