What Retirement Really Looks Like With $2.5 Million in Savings

"For as long as most of us can remember, the idea of retiring with $2.5 million in the "bank," is something of a dream. The belief that this amount of money would guarantee decades of worry-free living feels like all of the stars aligning after decades of hard work, disciplined savings, and investing, and the idea that one day you would get to enjoy the fruits of your labor."

"Let's assume you are going to use what has become the standard for withdrawal over the last few years, and that is the popular 4% rule. Before you take into consideration taxes, inflation, etc., you should be able to comfortably withdraw $100,000 annually, which is the baseline to live 30 years with a balanced and mostly invested portfolio. The hope is that when paired with Social Security, this $100,000 is a practical solution for a comfortable middle-class lifestyle."

$2.5 million can generate roughly $100,000 annually using a 4% withdrawal rule, providing income to last about 30 years with a balanced portfolio. Paired with Social Security, that income can support a comfortable middle-class lifestyle. Increasing withdrawals to 5% raises income to about $125,000 but likely reduces portfolio longevity to roughly 25 years. A more conservative 3.7% withdrawal yields about $92,500 and can extend coverage to 35–40 years. Retirement adequacy depends on age at withdrawal, spending patterns, portfolio allocation, taxes, inflation, healthcare costs, housing status, and exposure to sequence-of-returns risk.

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