Do I have enough money to retire in two years?


Q. I’m planning to retire in two years. I have saved $2.5 million in mostly exchange-traded funds and I have an emergency fund of $50,000. I think my expenses, which are now about $120,000, will maybe be $95,000 when I retire. Yes, I’m one of the few that is still going to the office every day. How can I decide if I have enough money?
— Hopeful

A. Congratulations on your upcoming retirement.

There are a variety of important questions that need to be addressed before we can answer the big question: “Do I have enough money to retire?”

It is likely that some of the funds you have saved are housed in retirement accounts and some are in non-retirement accounts, said Marnie Hards, a certified financial planner with Aznar Financial Advisors in Morris Plains.

She said the tax implications of the withdrawals will be based on where the funds to cover your living expenses will be coming from and how much of the balance in the taxable account is growth versus cost basis, or how much you originally invested. You also did not mention how old you are.

We’re going to make some assumptions here: that half of your savings are held in an IRA and half are in a non-qualified account, and that you’re 58 with plans to retire at age 60.

It’s likely that you will qualify for Social Security benefits, which will cover a portion of your living expenses, Hards said.

“So although you will need to draw down $95,000 per year from your portfolio, once you start taking Social Security benefits, this amount needed will decline by the amount of your net Social Security benefits,” she said.

To determine whether you have enough money to last for your lifetime, some assumptions must be made regarding inflation, rate of return and life expectancy.

Given that we don’t have a crystal ball and cannot know the answers to these questions, we’ll go with conservative assumptions.

If you assume a conservative real rate of return of 2% — the difference between the nominal rate of return and the assumed rate of inflation — and a life expectancy of 100 and that you start taking Social Security benefits at age 67 (which by the way is not necessarily the best time to do so, but we’ll use if for purposes of analysis), you should be able to comfortable retire, Hards said.

Keep in mind that this assumes that you do not need funds in excess of the $95,000, she said.

If, for example, if you do not have a long-term care insurance policy and you, or a spouse if you are married, end up needing long-term care, the costs associated with this could dramatically reduce the amount of your investment portfolio, Hards said.

On another note, Hards said it is great that you have an emergency fund set aside.

“I suggest you put the emergency fund into a high yield savings account which will offer you significantly more than a typical bricks and mortar bank,” she said, noting that there are savings accounts available now that earn more than 4%.

“I suggest that you also make sure your estate documents are up-to-date and do an overall review of your various insurance coverages to ensure you are appropriately covered,” Hards said.

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This story was originally published April 27, 2023. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.