Can You Stop Saving With a $5 Million Retirement Nest Egg? Experts Weigh In
Written by
Gabrielle Olya
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Brendan McGinley
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If you’ve hit the $5 million mark in retirement savings, you’ve achieved a major milestone that you should be proud of. But does that mean you can finally stop saving?
GOBankingRates asked financial experts to weigh in on whether this milestone signals financial freedom, or just another checkpoint.
Retirement Flexibility Matters More Than Your Savings Total
Jeff Herman, founder and investment advisor at The Jeffrey Group, believes that it’s more important to build a retirement nest egg that can adapt to changing needs rather than aiming for a particular amount.
“A $5 million portfolio might look like financial freedom on paper, but it’s a checkpoint for many — not a finish line,” he said. “The real question isn’t ‘Do I have enough?’ but ‘Can my plan adapt?’ Inflation, healthcare shocks and tax changes can all erode what looks sufficient today.”
Herman advises his clients to focus on how they can generate income in retirement by staying flexible.
“Retirement success isn’t about the number associated with your account balance,” he said. “While important, the priority focus should be on how durable your income is. Create consistent, purpose-driven income streams that don’t rely solely on market returns.”
Your Portfolio Needs To Be Able To Withstand Market Downswings
If you have $5 million saved, you need to ask yourself if your plan would hold up in bad markets, said Steven Rogé, CFP, chief investment officer and CEO at R.W. Rogé & Company, Inc.
“With a balanced portfolio and a sensible withdrawal rule of roughly 3% to 4%, $5 million can generally support about $150,000 to $200,000 per year before taxes, with periodic adjustments as markets and inflation change,” he said. “The goal is to fund life from growth plus income, not to chase the highest dividend and accidentally shrink the principal that has to support you for decades.”
You can stop saving at $5 million if your portfolio meets certain requirements: “Your near-term spending is fully covered by cash and bond sleeves, your long-term money is invested for growth and your withdrawal rate and taxes have been tested against rough-year scenarios,” Rogé said.
“If you plan to retire very early, spend at a high rate or fund large legacy and giving goals, keep saving and sharpen the tax plan,” he continued. “The litmus test is simple — your plan should survive a bad market on paper and give you the confidence to sit through it in real life.”
$5 Million Can Be Sufficient Based on Your Lifestyle Goals
Andrew Latham, a certified financial planner with SuperMoney.com, believes that most people can stop saving when they accumulate a $5 million nest egg.
“For many, $5 million is more than enough,” he said. “Using a 4% withdrawal rate, that translates to $200,000 per year in potential income, not including Social Security or other assets. If your annual spending needs fall well below that, and your plan accounts for taxes, healthcare and inflation, you may have already hit your financial independence number and could stop actively saving.”
However, there’s also no harm in continuing to save.
“Some people keep contributing because they enjoy their work, want more cushion or have philanthropic or legacy goals,” Latham said. “But there is no rule saying you must keep contributing once you have reached your target. Instead of getting caught up in whether you are maximizing every account, focus on whether your full portfolio supports the life you want, now and in the future.”
On the Flip Side, $5 Million Might Be Insufficient for Your Desired Retirement Lifestyle
While $5 million sounds like a lot, it may not be able to support your dream retirement — depending on what that dream looks like.
“Your monthly expenses determine your financial readiness — you don’t retire on a number, you retire on income,” said Nicholas St. George, CFP, owner and advisor at St. George Wealth Management. “Most people would say [$5 million] meets their needs. But most people don’t live your life, or have your tax situation or your goals. If you spend $400,000 a year, you’re on a fast track to selling your beach house to fund your golf habit.”
The only way to determine if $5 million is sufficient is to create a monthly spending map.
“You can use this to predict your expenses during retirement, and then analyze the results through a complete financial plan that considers taxes, inflation and investment risk,” St. George said.
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