What a Retirement Lifestyle With $7 Million Looks Like

Imagine retiring with $7 million in your 401(k) or IRA. What kind of lifestyle might that size nest egg support? Picture owning a luxurious home in a high-end neighborhood, driving top-notch vehicles, regularly vacationing in exotic locations and availing best-in-class healthcare without worrying about rising costs. When planning a $7 million retirement, it’s important to differentiate between net worth and liquid assets, know how to estimate what you need to retire and identify suitable strategies to invest and grow your nest egg.

Remember that a financial advisor can help you each step of the way, and provide you the guidance needed to retire the way you want.

Is $7 Million Enough to Retire?

To answer the question of whether $7 million is enough to retire, we need to consider the lifestyle you envision for your retirement. For instance, let’s suppose you wish to maintain 80% of your pre-retirement income for 25 years. If your final salary is around $350,000, you’ll need to withdraw $280,000 per year or $23,333 per month. Once you factor in a 2% annual inflation rate and a modest average annual growth rate of 5%, you’d still have $2.2 million leftover after taxes.

However, this is a broad estimation. Several factors could impact the sustainability of a $7 million retirement fund. These include higher-than-expected inflation, the cost of living in your desired retirement location, unexpected health expenses and market volatility, among others.

How $7 Million Net Worth vs. Liquid Assets Changes Things

When discussing substantial wealth like $7 million net worth and liquid assets, the difference becomes critically important for financial planning. Net worth represents the total value of all assets minus liabilities, including illiquid holdings like real estate and business interests. Liquid assets, however, are those that can be quickly converted to cash without significant loss of value, such as cash, stocks and bonds.

Having a $7 million net worth might suggest complete financial freedom, but this depends heavily on liquidity. Someone with most wealth tied up in illiquid assets like a private business or real estate portfolio, may face cash flow constraints despite their impressive net worth. Daily financial flexibility requires sufficient liquid assets to cover expenses and opportunities without disrupting long-term investments.

The liquid portion of a $7 million portfolio dramatically affects emergency preparedness. Financial advisors typically recommend having 3-6 months of expenses in liquid assets, but high-net-worth individuals often need more substantial cash reserves. Those with primarily illiquid wealth may need specialized strategies like lines of credit against assets to ensure access to funds during unexpected circumstances.

The balance between liquid and illiquid assets within a $7 million portfolio shapes investment strategy options. Highly liquid portfolios can quickly adjust to market conditions and opportunities, but may sacrifice potential returns from illiquid investments. Conversely, portfolios heavy in illiquid assets may offer higher long-term returns but limit flexibility to rebalance or respond to changing financial goals.

Liquid and illiquid assets within a $7 million portfolio face different tax treatment. Liquid investments like stocks generate realized gains when sold, triggering immediate tax consequences. Illiquid assets like real estate may benefit from tax deferral strategies and potentially more favorable long-term capital gains treatment, making the composition of wealth significant for tax planning.

Perks of Retiring With $7 Million

A wealthy retired couple relaxes poolside at their home.

Retiring with a substantial fund like $7 million potentially opens up opportunities to enjoy life to its fullest, under the right circumstances. Here are some of the perks that a $7 million nest egg may afford you:

1. Not Worrying About the Basics

Retiring with $7 million means you can bid adieu to financial anxiety. You’ve amassed a significant nest egg that, when managed prudently, can provide you with a stable and worry-free income for the rest of your life. Basic living expenses like housing, healthcare and groceries will no longer keep you up at night. You can allocate a portion of your savings into low-risk investments, ensuring a steady stream of income.

2. Making Unneeded Purchases

A $7 million retirement fund could also potentially allow for luxury purchases that go beyond basic needs. Whether it’s a dream home with all the bells and whistles, a collection of classic cars or designer wardrobes, you have the means to indulge in your passions and enjoy the luxuries you’ve always desired. Your retirement years can be marked by comfort and extravagance.

3. Traveling More Than Most

While many retirees dream of travel, those with $7 million can take it up a notch. With a substantial retirement fund, retirees could afford to travel extensively, visiting various countries or living as expats part of the year. Whether it’s witnessing the Northern Lights in Iceland, going on a safari in Africa or cruising through the Mediterranean on a private yacht, your retirement travel experiences can be nothing short of extraordinary.

How to Calculate What You Need to Retire

Estimating retirement needs involves considering several factors. However, bear in mind that these are often just estimations, and actual needs may vary. Periodic reassessment of these estimations, especially under specific life events, can be strategically important.

Estimate your retirement age: First, decide when you want to retire. This will greatly impact your retirement savings goal. The earlier you retire, the more you’ll need to save.
Determine your retirement lifestyle: Consider the kind of lifestyle you want during retirement. Do you plan to travel extensively or live a more modest life? Your desired lifestyle will play a significant role in your retirement savings goal. The experts at Fidelity Investments say most retirees will need to replace between 55% and 80% of their pre-retirement income to preserve their lifestyle.
Calculate your expenses: List down all your expected expenses during retirement, including housing, healthcare, groceries, transportation and entertainment. Be realistic and account for inflation.
Assess your current savings: Calculate the current value of your retirement accounts, including 401(k)s, IRAs and other investments.
Social Security and other income sources: Take into account any expected income sources during retirement, such as Social Security, pensions or rental income.
Inflation factor: Inflation erodes the purchasing power of your money. Consider an inflation rate of around 2-3% when projecting your future expenses.
Investment returns: Consider the potential returns on your investments. A diversified portfolio can help your savings grow over time.
Use a retirement calculator: SmartAsset’s retirement calculator can help you fine-tune your calculations, taking into account various variables and investment strategies.

How to Invest $7 Million for Retirement

To utilize a $7 million fund for retirement optimally, creating a diversified portfolio that balances risk and returns could be crucial. Consider spreading your investments across different asset classes, such as stocks, bonds, real estate and even alternative investments like commodities or hedge funds. Diversification helps mitigate risk and maximize potential returns.

You may want to allocate a portion of your portfolio to growth-oriented investments that have the potential for higher returns over the long term, while simultaneously investing in income-producing assets like bonds or dividend stocks for stability.

Periodically review and rebalance your portfolio to maintain your desired asset allocation. This ensures that your risk profile aligns with your objectives over time. Also, remember, retirement planning is a marathon, not a sprint. Avoid making impulsive investment decisions based on short-term market fluctuations. Instead, stay focused on your long-term goals.

Tax Planning With a $7 Million Retirement Portfolio

When evaluating whether $7 million is enough to retire, taxes can materially influence how long those assets last. Even a well-constructed portfolio can face significant drag if withdrawals are not structured thoughtfully. This is why it can be a good idea to consider how different account types are taxed and how distributions affect overall income.

Traditional vs. Roth Accounts

If most of your $7 million is held in tax-deferred accounts such as a traditional 401(k) or IRA, withdrawals are generally taxed as ordinary income. Large distributions can push retirees into higher marginal tax brackets and increase exposure to other income-based thresholds.

By contrast, qualified withdrawals from Roth accounts are generally tax-free. Retirees with a mix of traditional and Roth assets may have greater flexibility in managing taxable income each year. The composition of your retirement accounts can therefore significantly affect long-term sustainability.

Required Minimum Distributions (RMDs)

Once you reach the required beginning age under current IRS rules, traditional retirement accounts are subject to required minimum distributions (RMDs). With a $7 million portfolio, these mandatory withdrawals could be substantial depending on how much is held in tax-deferred accounts.

Large RMDs can:

Increase taxable income
Trigger higher Medicare premiums through IRMAA (Income-Related Monthly Adjustment Amounts)
Reduce eligibility for certain deductions or credits

Planning for RMDs well before they begin may allow retirees to smooth income over time rather than face concentrated tax exposure later in life.

You can use our RMD calculator to estimate how much to withdraw from a pre-tax retirement account upon reaching RMD age.

Required Minimum Distribution (RMD) Calculator

Estimate your next RMD using your age, balance and expected returns.

Quickly estimate your RMDs and when to take them

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About This Calculator

This calculator estimates RMDs by dividing the user's prior year's Dec. 31 account balance by the IRS Distribution Period based on their age. Users can enter their birth year, prior-year balances and an expected annual return to estimate the timing and amount of future RMDs.

For IRAs (excluding Roth IRAs), users may combine balances and take the total RMD from one or more accounts. For 401(k)s and similar workplace plans*, RMDs must be calculated and taken separately from each account, so balances should be entered individually.

^*The IRS allows those with multiple 403(b) accounts to aggregate their balances and split their RMDs across these accounts.

Assumptions

This calculator assumes users have an RMD age of either 73 or 75. Users born between 1951 and 1959 are required to take their first RMD by April 1 of the year following their 73rd birthday. Users born in 1960 and later must take their first RMD by April 1 of the year following their 75th birthday.

This calculator uses the IRS Uniform Lifetime Table to estimate RMDs. This table generally applies to account owners age 73 or older whose spouse is either less than 10 years younger or not their sole primary beneficiary.

However, if a user's spouse is more than 10 years younger and is their sole primary beneficiary, the IRS Joint and Last Survivor Expectancy Table must be used instead. Likewise, if the user is the beneficiary of an inherited IRA or retirement account, RMDs must be calculated using the IRS Single Life Expectancy Table. In these cases, users will need to calculate their RMD manually or consult a finance professional.

For users already required to take an RMD for the current year, the calculator uses their account balance as of December 31 of the previous year to compute the RMD. For users who haven't yet reached RMD age, the calculator applies their expected annual rate of return to that same prior-year-end balance to project future balances, which are then used to estimate RMDs.

This RMD calculator uses the IRS Uniform Lifetime Table, but certain users may need to use a different IRS table depending on their beneficiary designation or marital status. It's the user's responsibility to confirm which table applies to their situation, and tables may be subject to change.

Actual results may vary based on individual circumstances, future account performance and changes in tax laws or IRS regulations. Estimates provided by this calculator do not guarantee future distribution amounts or account balances. Past performance is not indicative of future results.

SmartAsset.com does not provide legal, tax, accounting or financial advice (except for referring users to third-party advisers registered or chartered as fiduciaries ("Adviser(s)") with a regulatory body in the United States). Articles, opinions and tools are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual. Users should consult their accountant, tax advisor or legal professional to address their particular situation.

Capital Gains and Taxable Investments

For retirees holding part of their $7 million in taxable brokerage accounts, capital gains treatment may differ from ordinary income taxation. Long-term capital gains and qualified dividends are typically taxed at preferential rates compared to ordinary income.

Strategic harvesting of gains or losses may help manage overall tax exposure. However, selling appreciated assets can still create meaningful tax liabilities, especially in high-income years.

State and Local Tax Considerations

Where you retire can also affect your after-tax income. Some states do not levy income tax, while others tax retirement income, capital gains or even Social Security benefits differently. High-net-worth retirees relocating in retirement may find that state tax policies meaningfully influence portfolio longevity.

Property taxes and estate taxes at the state level may also factor into long-term planning decisions.

Medicare Premium Surcharges (IRMAA)

Higher retirement income can increase Medicare Part B and Part D premiums through IRMAA adjustments. Because these surcharges are based on income reported from prior years, large portfolio withdrawals in one year may increase healthcare premiums in a future year.

For retirees drawing substantial income from a $7 million portfolio, coordinating withdrawals with healthcare cost planning can become an important consideration.

Bottom Line

A married couple looks over their plan to retire with $7 million.

Retiring with $7 million could potentially offer a luxurious lifestyle, from covering basic needs to affording luxury vacations and purchases. However, the sustainability of a $7 million retirement fund depends on multiple variables that can change over time. Understanding the difference between net worth and liquid assets is essential in retirement planning. Estimating retirement needs involves considering factors like life expectancy and lifestyle desires.

Retirement Planning Tips

Taxes play an important role in many people’s retirement plans and the tax environment of the state in which you anticipate retiring is a crucial part of that equation. SmartAsset’s retirement tax tool can help you assess the tax friendliness of all 50 states.

A financial advisor can be a valuable resource when planning your retirement. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.