Can I Retire on $2 Million and Live Comfortably?

Article Summary

You might think $2 million is plenty of money for a comfortable retirement. But even with this amount of money saved, you will still have to plan carefully. When looking at options for retirement, you first need to decide what type of lifestyle you would like in retirement and if $2 million will cover it. If structured properly, a combination of Social Security payments and various retirement plans — such as annuities and 401(k)s — can help you live well on $2 million.

At some point in their lives, most people will start speculating about their retirement years. Will you spend time near your family in a modest accommodation or will you cruise around the Mediterranean while staying in top-notch hotels? In order to achieve either of these lifestyles, you’ll need to sit down and carefully plan how much money you would like to access on an annual basis, depending on how long you live.

As modern technology in the health sector becomes more advanced, lifespans are expected to increase significantly. This means that the retirement planning and money you thought would last until your death may not be enough. Many people feel like the ideal number for them is $2 million. But will it cover everything? And what would your annual and monthly income be? Let’s take a look.

Can you retire on $2 million?

The short answer is yes, you can retire on $2 million, but it’ll take careful planning. Your first goal should be to establish the annual amount you would like to receive to cover basic living expenses and existing liabilities. You should have a good idea of the costs that go into maintaining your current lifestyle, and you should take into account any bucket-list activities that you dreamed of in retirement. Your financial planning should also factor in inflation.

After you confirm your budget, you’ll need to figure out how to structure it. What makes up this $2 million savings? Is it a retirement plan, an annuity, Social Security income, or a combination of all of them? What is the time frame for each source, and are there any adjustments for living longer, such as a lifetime rider? As long as you make a plan and execute it, you should be able to retire comfortably on $2 million.

How to budget for retirement

The first step is to determine how much money you would need to live on each year without having to work, as well as the age when you want to retire. This amount should cover all of your current living expenses and any big-ticket dream ideas while taking inflation into account. This will give you a good idea of how much you want to accumulate in retirement savings.

Basic expenses

These are the items you need to survive, so you should budget for them first.

  • Housing. Your rent or mortgage payment is probably your biggest expense. However, it’s important to take note that at the time of your retirement, you may be finished or almost finished paying off your mortgage. You would then only be liable for maintenance and property tax in relation to your housing costs.
  • Food. Consumption of food should stay in line with your current living conditions.
  • Transportation. You should have a pretty good idea of how much you spend on transportation. If you live in the U.S., you probably drive, which means that you’ll be subject to fluctuating oil prices. If oil prices climb, this could increase your transportation costs, so allow for a buffer.
  • Utilities. Heat, electricity, and water costs can really add up, especially as gas and electricity prices fluctuate.


Once you know how much your basic needs cost, you can start thinking about your wants.

  • Travel. If you’ve always wanted to go to Bangladesh but never had the time, it could be a bucket-list item that you want to knock off in retirement. If your kids live in different states or even countries, you’ll likely want to travel and visit them as well.
  • Extras. Presents, your grandkids’ summer camp, attending concerts or sporting events — everyone has extras they like to spend on. It’s important to have an idea of how much you want to spend on various other extras.

Sample budget: $2 million in retirement income

As an example of a $2 million retirement, we will give you a breakdown of 40-year-old Camilo, a prospective retiree who lives with his wife, Claudine.

Expense Current Inflation Adjusted
Housing $36,000 $72,000
Food $12,000 $24,000
Transportation $24,000 $48,000
Travel $8,000 $16,000
Extras $8,000 $16,000
Total needed annually $88,000 $176,000

When Camilo originally set these numbers, they weren’t as large. However, Camilo was clever and factored inflation into his retirement. Camilo and his wife have all of the basics covered, plus travel and various presents for their grandchildren and loved ones.

Inflation ran at an average of 1.9% from 2001 to 2021 and since then has accelerated substantially. In order to compensate for this, Camilo doubled his budget from current living conditions, as he will be spending the money at age 60, which is 20 years from now. Furthermore, he does not know how long he will live.

Most people don’t know the ins and outs of finance and investments, particularly the regulations and minute details. The way to solve this is to talk to a certified financial planner or advisor. Here are some advisors to consider.

Pro Tip

It’s important to note that some retirement products, like annuities, let you raise your withdrawal levels to correspond to inflation. However, for simplicity, we have Camilo estimating inflation rather than using a financial product that incorporates inflation.

How to save for retirement

Camilo knows his annual retirement income goals, but can he get there? And can he get there with $2 million? Let’s break it down.


Retirement annuities are financial products that provide guaranteed money either annually or monthly for retirees. The key word here is “lifetime.” Unlike most other retirement plans, which will have terms and maturity dates, annuities are mostly there to stay for the duration of your life. You can pay for annuities in a lump sum or at monthly intervals.

Fixed vs. variable

Annuities come in two forms, fixed and variable. With a fixed annuity payment, you know exactly how much money you will receive once your annuity payments begin on an annual or monthly basis. Fixed annuities will have a lower interest payout than variable payments. They are very similar to the interest rates that certificates of deposit (CDs) pay. However, no matter what happens (barring global nuclear annihilation) you can rest assured that you will receive a certain amount every year.

With variable annuities, you tie yourself to the stock market and financial markets, which means this type of investing involves risk. A variable annuity will have a basket of assets, such as stocks and bonds, that will move up and down with the market. Due to this, the withdrawal amounts can also vary. These days, many people opt for lifetime riders with a variable annuity to guarantee a minimum withdrawal amount.

Here is an example of an annuity with a lifetime rider (meaning income is guaranteed), with the goal of retiring at 60, when the annuity starts paying out.

Age Now 5 years 10 years 20 years
40 $267,769
45 $296,109
50 $219,664 $327,870
55 $167,337 $242,913 $356,211
60 $122,000 $185,458 $268,968
65 $134,600 $203,013 $292,217
70 $147,000 $219,718 $337,829
75 $153,200 $241,558

Camilo’s annuity options

Camilo is 40 years old and looking to retire in 15 or 20 years. Let’s break down what happens if he puts $2 million in an annuity at different points in time before he retires.

If Camilo waits until he turns 60 to purchase his annuity, then his income of $122,000 will be less than his desired budget of $176,000. However, if he purchases the annuity now, at 40 years old, when he turns 60, he is guaranteed a lifetime income of $267,769. This is much more than his inflation-adjusted retirement budget.

Depending on when Camilo decides to purchase the annuity and if he has the money, he might need some more income. This typically comes in the form of additional retirement plans or Social Security.

Pro Tip

Many people will also design their investment plans in order to purchase an annuity and receive the guaranteed income. For instance, a retirement or investment plan that matures over 20 years at the age of retirement can then be used to purchase an annuity. To properly retire, you should streamline all of these plans.

Retirement plans

Retirement plans, particularly those that come with significant tax advantages, are great ways to save for your retirement. If the plan lets you, you can take the cash value of the plan and use it for an annuity. You might choose an IRA, a Roth IRA, a 401k, or a Roth 401k, depending on your tax status.

You can have just one retirement plan or a combination of different plans. Furthermore, as there are limits to the contributions you can make and government tax advantages with certain 401(k)s and IRAs, you might want to have more than one type of plan.

Camilo’s retirement plan

Remember, Camilo is 40 years old, now makes $120,000 a year, and wants $2 million by his retirement at age 60. If he uses a retirement plan to reach some or all of that goal, here is what that would look like.

Retirement calculation Amount
Total invested $754,899
Total needed $2,002,973
Years until retirement 20 years
Years after retirement 35 years
Estimated annual income $116,500

As retirement plans are not guaranteed for life like annuities, particularly ones with lifetime riders, they run out. In this scenario, Camilo invests right now at age 40. He hopes to retire at age 60. He plans to live until 95, so he has budgeted for that.

You can see that even if Camilo can obtain $2 million by age 60 and withdraw the money, he’ll only have around $116,500 annually for the next 35 years. This obviously isn’t enough for his budget and is similar to if he just bought an annuity at age 60 rather than earlier. To make up this shortfall, Camilo might look to start taking money out of his Social Security benefits.

Social Security

Social Security is a government program designed to provide seniors with retirement income. Over 65 million people, or one in every six U.S. adults, collected Social Security in January 2022.

Every eligible adult makes Social Security contributions based on a proportion of their earnings and in return they will receive a benefit amount based on what they paid in. The graph below is an example of Social Security benefits and how they relate to income.

As Camilo makes around $120,000 a year, his Social Security at age 65 will be around $2,687 per month. That comes to $32,244 on an annual basis. So if Camilo retires at 60, he will not collect Social Security until age 65.

Can Camilo retire on $2 million and live comfortably?

Camilo can live on $2 million and live comfortably, but he has to have a plan that allows him to purchase an annuity at any point before the age of 55. If he can get the $2 million together by age 53 or 54, the annuity will cover it. Even if Camilo purchases an annuity with a lifetime rider at age 55, he can cover the full $178,000 of planned expenses with the annuity ($167,337) and his Social Security benefits ($32,244).

Camilo will probably want to diversify between annuities, retirement plans, and Social Security benefits to reach his desired $2 million. As long as he plans, saves, and structures it the right way and talks to a registered investment advisor, Camilo will be able to retire at age 60 and live comfortably.


Can you retire at 65 with $2 million?

Yes, as long as you structure it properly, $2 million should be enough to retire on. But this depends on your budget and your lifestyle expectations.

How much income will $2 million generate in retirement?

That all depends on when and how you invested in retirement. If you bought a $2 million annuity at age 40 and retire at 60, then you will receive income of more than $267,000 on an annual basis. If you invest in a retirement plan and just draw from it once it reaches $2 million, then your income will be substantially lower, around $116,000. However, this income from a traditional retirement account will only last until age 95.

Can I retire at 55 with $2 million?

Yes, if you have $2 million at age 55, you can retire by purchasing an annuity with the $2 million or drawing down from it. Whether you can truly retire comfortably or not depends on your living costs and estimated budget.

Are you rich if you have $2 million?

“Is $2 million enough to retire on?” and “Does $2 million make you rich?” are completely different questions. For instance, you can retire on $2 million pretty comfortably but you won’t live an amazingly luxurious life. However, there are other variables to take into account.

For instance, $2 million for retirement in the U.S. lets you live comfortably. But with $2 million in Bangladesh, you are most definitely rich. So it depends on your location, too.

What is a good monthly retirement income?

A good monthly retirement income will cover your expenses with a bit of a buffer, and also factor inflation. For example, if you spend $2,000 per month now on living expenses, maybe double it to $4,000 to factor in inflation. Then, factor in a $500 buffer. So $4,500 a month should be okay.

Key Takeaways

  • Yes, $2 million is enough money to live comfortably during retirement as long as you budget and structure your investments properly.
  • A budget must consist of basic living costs, as well as extra and travel expenses. It should also take inflation into account.
  • Annuities are a popular way to guarantee income for life, particularly with variable annuities that have lifetime riders. The sooner you purchase an annuity, the larger the payout will be.
  • Retirement plans like 401(k)s and IRAs, along with Social Security benefits, are other ways that people can reach their monthly income goals in retirement.
View Article Sources
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