Is $5 Million Enough to Retire at 50?

Retiring at 50 is an ambitious goal that gives you more time to take on personal projects and spend time with loved ones. However, leaving the workforce 12 years before you qualify for Social Security is a financial challenge. Even with $5 million, you’ll need a clear plan to manage unpredictable retirement expenses. From medical bills to inflation, you’ll need to keep up with the cost of living during your golden years. Here’s how to know if $5 million is enough to retire at 50.

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Is $5 Million Enough to Retire at 50?

A $5 million nest egg can provide $200,000 of annual income when the principal generates a return of 4%. This estimate is on the conservative side, making $200,000 a solid benchmark for calculating your retirement income versus expenses.

The average household headed by someone between ages 45 and 54 spent around $97,320 in 2023, according to the most recent BLS Consumer Expenditure Survey. That number was approximately $65,150 for households headed by someone between 65 and 74 years old. These figures are far beneath the income you’d receive from a $5 million retirement fund, but retiring comfortably depends on your pursuits and expenses. Therefore, outlining your income and expenses is vital when calculating the feasibility of retiring on $5 million.

How to Determine How Much You Need to Retire

Drawing retirement income from a $5 million portfolio means having a solid financial plan. Here’s what to remember while planning your third act:

Estimate Your Costs in Retirement

Your expenses in retirement determine your ability to live on a specific income. Your lifestyle will influence monthly expenses, meaning your monthly income will constrain what you can do.

For example, $200,000 in annual income equals $16,666 per month. This figure gives you plenty of room to include luxuries and traveling in your budget. For instance, a two-week luxury vacation to Japan would cost a couple approximately $10,500, according to BudgetYourTrip.com. That would still leave you over $6,000 to cover your other expenses.

Your life expectancy is also a significant component of your retirement plan. For example, retiring at 50 and living until 90 means a 40-year retirement. As healthcare costs rise with age, include them in your retirement plan. It’s recommended to allocate 15% of your annual income for medical expenses. In this case, that means setting aside $30,000 annually.

Likewise, taxes don’t go away when you retire. Regardless of income during your career, you’ll still owe income taxes and property taxes after you retire. That said, you can bypass income taxes if you saved primarily in a Roth IRA or Roth 401(k).

On the other hand, traditional IRAs and 401(k)s will incur income taxes because they use pre-tax dollars. Furthermore, if you have numerous taxable accounts, you might be subject to various tax rates. For example, you’ll incur capital gains taxes when selling stocks you’ve held for over a year outside of a retirement account. Therefore, understanding your account type is essential to calculating how taxes will impact your income.

That said, you won’t be able to touch your conventional retirement accounts until age 59 ½ under current tax law. That’s because the government levies a 10% penalty on withdrawals from 401(k), IRA, or 403(b) before age 59 ½. You’ll need to keep part of your $5 million in a more accessible account. For instance, there are no withdrawal penalties on income from savings or brokerage accounts. You’ll only pay income taxes and capital gains taxes, respectively.

Finally, inflation is a pesky constant that gradually increases the cost of living. To assess whether $5 million is enough, outline your expected income and expenses.

Pinpoint Retirement Income Streams

Then, you can calculate your retirement income. Fortunately, you can withdraw income from multiple sources, including the following:

Retirement accounts: For example, an IRA or 401(k) is a key part of your calculations. A portfolio with a $3 million principal averaging a 5% return can provide $150,000 of income per year. Consider using the remaining $2 million to diversify and create penalty-free income before age 59 ½.
Social Security: Your work history and retirement age affect your Social Security income. According to the Social Security Administration, the average retirement benefit is $1,981 per month, as of February 2025. Delaying your benefits beyond your full retirement age increases your income by 8% per year up until age 70. The typical Social Security beneficiary can receive 24% more by waiting until age 70 compared to claiming at full retirement age (67). While maximizing your benefit sounds nice, what’s most important is meshing your benefit with your other income sources.
Annuities: You can purchase an annuity from an insurance company to receive guaranteed monthly income for the rest of your life. For example, a $1 million annuity can provide a 50-year-old male approximately $5,140 per month, but conditions vary based on age and the company you choose.
Whole life insurance: A whole life insurance policy pays a sum to your beneficiaries when you pass away. It also builds a cash value that you can withdraw. Typically, the growth rate of these policies is 2% or less. Therefore, you can draw money from your policy at any time—just remember, you’ll pay standard income taxes on the funds.
Bank accounts: The current bout of inflation has increased interest rates, meaning high-yield savings accounts are excellent savings vehicles for retirees. These accounts don’t have early withdrawal penalties and can provide returns of 4%. So, you’ll receive sufficient income for the 4% rule and don’t have to risk your money in the stock market.

Run the Numbers

Once you line up your income and expenses, you can crunch the numbers. For example, say you have $3 million in an IRA, $1 million in a brokerage account, and $1 million in high-yield savings accounts and certificates of deposit (CDs). You can’t touch your IRA money for the 9 ½ years of retirement. So, you’ll need to use your brokerage and bank account money until then. In addition, you’ll supplement your income further by taking Social Security at age 62. You’ll need a tighter budget during the first nine years of retirement.

You have $2 million between your two accessible accounts. Assuming a 4% return means $80,000 of annual income. So, your monthly income at 50 will be $6,666. You’ll increase this number by 3% annually to account for inflation. Then, once you hit age 59 ½, your income will more than double, reaching $200,000 annually, thanks to withdrawals from your IRA.

Therefore, in the example above, you must have less than $6,666 in monthly expenses during your first 9 ½ years of retirement to retire at 50. Of course, you can allocate less money into your IRA to make the first nine and a half years more comfortable or work part-time to make up the gap. Leaving more funds in your IRA untouched for nearly a decade can boost your future income.

How to Boost Your Retirement Income

Five million dollars can provide a hefty investment income. However, if you’re having trouble making your budget work, you can boost your income in these ways:

Delay Social Security Benefits

You become eligible for Social Security at 62, but claiming it then permanently reduces your monthly benefit. You’ll have to wait until age 66 or 67 to receive you full benefit, but delaying it will increase your benefit by 8% per year until age 70. Therefore, it’s vital to start collecting Social Security at a strategic point that supplements your other retirement income.

Get a Better Interest Rate

Interest rates are the highest they’ve been in decades. Therefore, assets with virtually no risk—such as certificates of deposit (CDs) and savings accounts—are more viable investment vehicles. If you’re earning less than 3% with your current accounts, you should be able to find a higher-yielding option quickly.

Understand Your Income Tax Implications

Roth IRAs and Roth 401(k)s provide income during retirement without incurring taxes. This advantage means you can draw funds from these accounts without jumping into the next tax bracket. So, timing your withdrawals from these accounts helps manage your tax burden.

Bottom Line

Retiring at 50 gives you decades to enjoy with your career behind you, and $5 million is a sizable sum to do so. While the first nine and a half years might be challenging because of the lack of access to your retirement accounts, you can diversify in multiple income streams to provide yourself with an income of $80,000 or more for your first decade of retirement.

At 59 ½, you’ll unlock access to retirement accounts and reach about $200,000 in annual income. Claiming Social Security at 62 can increase it further. That said, your circumstances are unique, meaning you’ll need to estimate your retirement expenses as accurately as possible.

Tips for Retiring at 50 With $5 Million

Allocating $5 million among asset types can be confusing. Should you dump it all into a brokerage account so you can access it at any age? Or are the tax advantages of a 401(k) worth it? Fortunately, help from a financial advisor is easily accessible. Finding a qualified 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.
Saving $5 million indicates a certain amount of earning power. If you receive compensation from an employer offering a 401(k), you should look at 401(k) plan rules for highly compensated employees.