Is $5 Million Enough to Retire at 55?

Let’s say you want to retire early, at age 55. Is $5 million enough to achieve your goal? While the cost of living varies from place to place, a nest egg this size would likely provide more than enough money for decades of comfortable living. Even if you live another 50 years, $5 million in savings would allow you to live on $100,000 per year. Here are four things to keep in mind as you plan for a $5 million retirement at age 55.

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Is $5 Million Enough To Retire Early?

When planning for retirement, one of the most important questions is: How much money will I need? How much you need for retirement depends on several personal factors, including your lifestyle, expected expenses and how long your retirement will be. Still, financial experts often rely on general benchmarks to help guide retirement savings goals.

A common rule of thumb is to have around eight times your annual income saved by the time you retire at age 65. For example, let’s say you earn the national median of $80,610. Rounding that to $80,000 for the sake of simplicity, your target retirement savings would be approximately $640,000. This benchmark is designed to replace roughly 80% of your pre-retirement income, assuming Social Security and other sources cover the rest.

However, the more conservative and widely referenced 4% rule offers a different lens for determining whether your savings will be sufficient. According to this rule, you can withdraw 4% of your total retirement savings in your first year of retirement, adjusting for inflation in the years that follow, without running out of money for at least 30 years. Under this framework, a $5 million portfolio would allow for an initial annual withdrawal of $200,000, a generous income by most standards.

Of course, if you expect to live beyond 85 years of age, or want to ensure you don’t run out of money before you pass, you may want to adjust that withdrawal rate. Even if you retire early at age 55 and generate no further investment returns, a $5 million nest egg could still provide $100,000 annually for 50 years.

The Importance of Income Generation

A couple work in their garden, talking about whether $5 million is enough to retire at 55.

Income investing can be a highly effective strategy in retirement, especially when you have a sizable portfolio. The idea is to generate enough income through interest, dividends and other investment returns to support your lifestyle without dipping into your principal. With a $5 million portfolio, you have the flexibility to build an asset allocation that balances income generation with long-term stability and growth.

At age 65, a well-diversified retirement portfolio often leans more conservative, focusing on capital preservation and steady income. A typical allocation might include:

40–50% bonds and fixed income: U.S. Treasury notes, municipal bonds and investment-grade corporate bonds can offer reliable interest income.
30–40% equities: Dividend-paying stocks and equity income funds can provide additional yield with some growth potential.
5–10% alternatives: Real estate investment trusts (REITs) or other income-generating assets can further diversify your income sources.
5–10% cash equivalents: Money market funds and short-term CDs offer liquidity for near-term needs.

To illustrate the income potential, consider U.S. Treasury notes. In early 2023, a five-year Treasury offered a 3.5% annual yield. Investing your entire $5 million in these conservative securities would generate $175,000 per year in interest alone, enough to meet the needs of many retirees without touching the principal.

Of course, few retirees rely on just one asset class. A diversified mix of bonds and dividend-producing equities can provide both income and protection against inflation. This approach not only helps stretch your retirement savings, but also supports financial stability throughout your retirement years. A financial advisor can help tailor your asset allocation and income strategy to your specific goals, risk tolerance and spending needs.

Social Security and Medicare

Social Security will be a nice bonus to your retirement savings, although odds are, with $5 million in the bank, you probably won’t be depending on it. Medicare, on the other hand, can play a meaningful role in your retirement plan.

As you age, healthcare costs will be an increasingly important part of your budget. After you turn 65, you become eligible for Medicare, which will pick up a lot of these costs. Until then, make sure you budget for health insurance and associated costs.

Do You Have Dependents or Fixed Costs?

Remember that your retirement income needs will depend a lot on your expenses. For example, someone who has paid off the mortgage on their house will probably need less in savings than someone who pays rent. This means it’s important to make sure you account for any major expenses. For example, do you have any dependents to care for? Do you have fixed costs or major investments and properties? If you do own a home, will you have enough money to make major repairs if and when they arise?

Finally, consider your estate plan. If you want to leave money to your family or heirs, you may need more money or more time to earn it.

Bottom Line

A woman hiking, having retired at 55 with $5 million.

With $5 million, you can plan on retiring early almost anywhere. While you should be more careful with your money in extremely high-cost areas, a nest egg of this size can generate more than $100,000 per year of income. That should be more than enough to live comfortably on starting at age 55.

Retirement Planning Tips

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.
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 up to three vetted financial advisors who serve your area, and 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.