Can I Retire at 45 with $5 Million?

For many, an early retirement, even as early as 45, is the ultimate financial milestone. And with $5 million, that dream can become reality. While early retirement requires careful planning, a $5 million portfolio offers substantial flexibility and security. With prudent management, this level of wealth can fund not only daily living expenses, but also healthcare, family obligations, travel and even legacy or philanthropic goals. However, a retirement spanning 40 to 50 years still involves important decisions regarding portfolio management, tax efficiency and inflation protection.

A financial advisor can help you create a plan for preserving and growing your wealth for the decades ahead.

Is $5 Million Enough to Retire at 45?

At this level of wealth, the math is much more reassuring than for the typical retiree. Following the 4% rule, a $5 million portfolio could provide $200,000 of income in the first year of retirement. That’s well above the U.S. median household income of about $80,000 according to the U.S. Census Bureau, and would support a comfortable lifestyle even in higher-cost areas.

Remember, with the 4% rule, you’d adjust that number annually for inflation. And, in following this rule, a portfolio should last about 30 years. But, if you retire at 45, that $5 million is going to have to last longer than 30 years, potentially as long as 40 or 50 years.

For a more conservative approach, a 3% withdrawal rate would yield $150,000 annually. That’s almost double the U.S. median household income. And it’s more than double the $60,000 average per year a typical 65-year-old retiree spends in retirement (according to the most recent economic data from the Federal Reserve Bank of St. Louis).

A more aggressive 6% withdrawal rate could generate up to $300,000 per year. However, though taking that much annually increases the risk of depleting your assets over a long retirement.

With $5 million, you not only have flexibility in spending, but also the ability to absorb market downturns, fund rising healthcare costs and adjust your income strategy as needed.

A financial advisor can help you create a plan to do so.

Other Factors Affecting Retirement at 45 With $5 Million

Even with a robust portfolio, it’s important to consider the following variables when crafting your long-term retirement plan.

Retirement Portfolio Basics and Taxes

At 45, withdrawing from tax-advantaged accounts like 401(k)s or traditional IRAs typically incurs a 10% early withdrawal penalty plus ordinary income taxes. Most early retirees rely initially on taxable brokerage accounts, Roth IRA contributions (but not earnings), cash savings or income from real estate investments.

With $5 million, it’s likely your assets span multiple account or asset types, for example:

• Capital gains tax will apply when selling investments in taxable accounts, generally at 15% or 20%.
• You might also have to pay a possible 3.8% net investment income tax for high earners.
• If you have real estate investments, knowing whether any rental income is active or passive will help you determine your appropriate tax rate.

Careful sequencing of withdrawals and potential Roth conversions can minimize taxes. A financial advisor can also help employ tax-loss harvesting or charitable giving strategies to offset gains.

Location and Lifestyle

A $5 million portfolio gives you the freedom to choose where and how you want to live. Whether you prefer an upscale urban lifestyle in cities like San Francisco or New York, or a quieter, tax-friendly location like Texas or Florida, your wealth can accommodate a variety of scenarios. However, you’ll want to factor in not just housing costs, but also taxes, healthcare access and recreational opportunities.

At this level of wealth, maintaining lifestyle flexibility is possible, including frequent travel, hobbies, charitable giving or even supporting family members.

Inflation

Even for affluent retirees, inflation is a critical concern, particularly over a potential 40-year retirement. For example, at a 3% inflation rate, today’s $200,000 annual spending would rise to over $485,000 in 30 years.

Investing a portion of your portfolio in growth-oriented assets, such as equities or real estate, is essential to help preserve purchasing power.

Health and Longevity

Without employer-sponsored health coverage or Medicare until 65, you’ll need private health insurance, potentially at premium rates, plus a cushion for out-of-pocket costs. Long-term care insurance may also be worth considering.

Given the potential for decades of longevity, planning for increasing healthcare costs and extended care needs is essential.

Family Considerations

At 45, you may still have children at home or young adults in college. According to recent data from the College Board, the average annual cost for a four-year public university is around $12,000 (in-state) and over $31,000 (out-of-state). Private colleges often exceed $40,000 annually.

Whether funding education or providing future inheritances, family obligations should be incorporated into your broader financial plan.

Retiring at 45 With $5 Million – Social Security and Medicare

Social Security benefits can’t be claimed until at least 62, and early claims reduce your benefits.

For example, for someone who claim benefits at the full retirement age in 2025, the maximum monthly Social Security benefit is $4,018. Claiming early at age 62 reducing the maximum to $2,831; delaying until age 70 increases it to $5,108. And even though you might have $5 million in assets, Social Security can be a welcome secondary income stream.

Meanwhile, Medicare eligibility starts at 65. So retirees between 45 and 65 will need private health insurance or access to healthcare marketplaces.

Create a Retirement Budget

To see what a retirement at 45 with $5 million might look like on paper, we’ve created a sample retirement budget for a 45-year-old retiree living in a medium to high cost-of-living area, such as Seattle or Boston, targeting an annual income of $200,000:

Of course, your actual expenses may vary based on your housing choices, travel frequency, family obligations and other lifestyle factors. This sample budget simply shows you where you can potentially allocate your funds.

For example, take the $60,000 allocation for housing. This is in line with the general rule of thumb that recommends spending no more than 30% of your income on housing costs. But even in Seattle, where the average apartment costs $2,334 a month ($28,008 a year), this allotment is more than generous.

Managing a $5 Million Portfolio at 45

With a $5 million portfolio, your focus should be on both growth and income. A diversified portfolio might include:

• 60% equities (domestic and international stocks)
• 25% bonds and fixed-income securities
• 10% real estate or alternative assets
• 5% cash or equivalents

This allocation balances income needs with long-term growth potential and provides liquidity for near-term spending.

Professional portfolio management or advisory services that focus on high-net-worth individuals can be valuable at this wealth level to optimize asset allocation, rebalance periodically and manage taxes efficiently.

Annuities

Annuities can be a useful income tool, even for wealthier retirees. With $5 million, you might consider:

• Deferred income annuities: Lock in future income starting at, say, age 65 or 70.
• Immediate fixed annuities: Provide guaranteed income now to cover essential expenses.
• Variable or indexed annuities: Allow potential for growth while offering some income guarantees.

Annuities help mitigate longevity risk (outliving your assets) and can provide peace of mind. However, they require careful consideration due to fees, liquidity restrictions and inflation adjustments (which may cost extra). Given your wealth, you can strategically use annuities for income floor planning rather than as a primary income source.

Estate Planning

At this portfolio level, estate planning becomes a priority. Consider:

• Revocable living trusts: Avoid probate and ensure smooth transfer of assets.
• Advanced tax strategies: Such as lifetime gifting, grantor retained annuity trusts (GRATs) or charitable remainder trusts.
• Long-term care planning: Protect assets from future healthcare or nursing home costs.
• Beneficiary review: Regularly update retirement accounts and insurance policies.

Working with an estate attorney and tax advisor can help ensure your wealth is protected and distributed according to your wishes while minimizing tax liabilities for heirs.

Bottom Line

Retiring at 45 with $5 million puts you in an enviable financial position. With prudent spending, diversified investments, thoughtful tax management and careful healthcare planning, you can enjoy a comfortable, flexible lifestyle for decades. Your wealth offers you freedom — not only to retire early but also to travel, pursue passions, support family and craft a meaningful legacy. Collaborating with a financial advisor can help you create a customized strategy that maximizes your income today while protecting your wealth for tomorrow.

Retirement Planning Tips

• Consider working with a financial advisor to develop a comprehensive financial plan that addresses your income needs in retirement, estate plan and more. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area. You can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• How much do you need to save to fund your eventual retirement lifestyle? If you’re scratching your head at the question, consider using SmartAsset’s retirement calculator. Our tool will tell you approximately how much money you’ll need to retire and how much you need to save each month to get there.

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