Is $2.9 Million Enough to Retire Comfortably?
You typically don't build up a multi-million-dollar nest egg by timing the markets, cutting corners, or getting lucky.
The majority of the folks we work with at Keen Wealth who hit that kind of financial milestone get there because over many years they've collaborated with their advisor on a plan they have real confidence in. Through market swings and the inevitable ups and downs of life, they've worked hard, made adjustments, stuck to their plan, and built meaningful wealth.
But as you near retirement, it's not about your number. It's about what your number can do for you.
Here's an example of how Keen Wealth's comprehensive planning process goes beyond the math to determine if a $2.9 million nest egg is "enough" for a married couple to enjoy a successful retirement at age 65.
The Big Picture: What Does $2.9 Million Mean in Retirement Terms?
The 4% Rule has its limitations, but a little back-of-the-napkin math can be a good way to establish baselines and expectations with soon-to-be retirees.
A 4% annual withdrawal rate from a $2.9 million nest egg comes out to $116,000 per year, or just under $9,700 per month. If you don’t have a legacy goal and aren’t concerned about spending down your principal over time, then you likely can take more than 4% annually from your portfolio, but for our example here, we will stick with the 4%.
One or both spouses might also decide to take Social Security or have a pension. That adds an additional level of predictable monthly income.
Folks who aren't working with an advisor might stop right there and say, "Great! We can live on that!"
Some might even think about things they won't be paying for anymore -- their mortgage, college tuition, an extra car -- and conclude, "Once we're both claiming Social Security, that will be more money than we lived off when we were working!"
Maybe, maybe not.
Where the 4% Rule and other calculations like this fall short is assuming your portfolio, your life, and your financial needs will all proceed in a straight line. And retirement just doesn't work like that. A financial plan gives you the tools to account for variables that aren't necessarily going to show up on the back of the napkin.
The Key Variables That Determine “Enough”
Spending Patterns
The single most important variable in any financial plan, and the one you have the most control over, is how much you're spending. Your retirement budget will depend on factors like:
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What are your lifestyle needs and wants?
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Are you planning to age in place at your current home? Moving to the beach?
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What kinds of hobbies do you have?
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Do you plan on travelling?
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Are you supporting adult children, grandchildren, or older relatives?
Some retirees may experience a dip in their spending early in retirement compared to their working years, while others may intentionally plan to spend more in the first 10 years or so in what we call the “go-go” years.
Either Way, Don’t Forget ...
Longevity, Healthcare, and Long-Term Care
Folks who are planning on their own often fail to take into account how healthcare spending changes throughout retirement.
For one, a 65-year-old couple needs to include Medicare premiums in their monthly budget: $185 per month in 2025. While our 4% calculation for annual income wouldn't trigger any Income-Related Monthly Adjustment Amount (IRMAA) surcharges, if other sources of income like Social Security or selling an investment pushed them over $212,000 (2025) their premiums would go up.
Also, if we assume this couple is relatively healthy, they may need to plan for three decades of retirement living. And as they age, while spending on things like travel and entertainment goes down, spending on healthcare will probably rise, especially if they need long-term care that Medicare doesn't cover. According to a study conducted by Fidelity, a typical 65-year-old couple retiring today might spend as much as $330,000 (after tax) on out-of-pocket healthcare expenses throughout their life.
Investment Strategy
While it's common for retirees to rebalance their portfolios to minimize risk and maximize stability, this couple needs their $2.9 million nest egg to keep working for them as well. Keen Wealth would help them analyze their risk tolerance relative to their monthly budget needs to keep an appropriate portion of their nest egg in equities for growth. We would also allocate a portion of their wealth to fixed income investments of varying maturities.
Inflation
On average, purchasing power decreases by about 3% every year due to inflation. To put that into perspective, $100,000 today might feel like $60,000 in 25 years. Your withdrawal and investment strategies have to work together to manage inflation and maintain your standard of living.
Taxes
Whatever portion of that back-of-the-napkin $116,000 is withdrawn from a traditional 401(k), IRA, or brokerage account will probably be taxable. That withdrawal level would probably trigger taxes on Social Security benefits as well. That's why it's important to work out a withdrawal sequence that minimizes your tax liability, not just in a given year but for your entire retirement.
Common Missteps to Avoid
As big a number as $2.9 million is, it's not invulnerable to variables and mistakes, such as:
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Retiring without a clear spending plan.
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Assuming investment returns and withdrawals will be the same every year.
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Underestimating healthcare costs.
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Taking Social Security before full retirement age without planning for the tax ramifications.
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Failing to review and update your financial plan at least annually.
So, Is $2.9 Million "Enough"?
For many seniors, yes.
For others, maybe not.
And for anyone who doesn't have a comprehensive financial plan that is updated regularly? Impossible to say.
At Keen Wealth, preparing for retirement starts with your vision: the things you want to do, the places you want to visit, the people you want to spend time with, the impact you want to have on your loved ones and your community. You are always at the center of your personalized plan, not your numbers.
Get in touch and let's talk about how our process could help you live well in retirement.
About Bill
Bill Keen is a financial advisor with over 30 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he focuses on providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to Forbes, U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
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