Is $2 Million Enough to Retire Comfortably?

Jan 84 min read

The Short Answer: It Depends

A recent study from Northwestern Mutual found that the average American thinks they need around $1.46 million to retire. That suggests $2 million should be more than enough. But is it always?

The truth is a comfortable retirement depends on individual factors—and that goes for those years away from retirement just as much as for those right on the cusp. I have worked with clients that can retire on less than half that number, and with clients where 2 million is nowhere near enough.

1. Location and Cost of Living

Why It Matters: City dwellers in high-cost areas (think New York City, San Francisco, or Boston) often need a larger nest egg. Meanwhile, retiring in lower-cost regions can make even a smaller retirement fund go further.
For younger professionals: It may be a consideration that work remotely could shift stretch their dollar further and save more by working in lower cost areas too, but that is not without significant tradeoffs as mid-career professionals may also find some of the most lucrative opportunities and potential connections in higher cost areas because of the concentration of business and wealth.

2. Healthcare and Taxes

Healthcare: Medical costs often escalate later in life—unexpected illnesses or long-term care can quickly eat into your savings. Healthcare costs can also be potentially a lot higher if retiring prior to 65 when Medicare kicks in so this is another important consideration as to how much you will need to have saved.
Taxes: If most of your retirement savings are pre-tax (e.g., 401(k)s), remember the government might claim 10–30% (or more) when you withdraw. Planning ahead can help you avoid large tax surprises and squeeze the most value out of these accounts.
For younger professionals: Evaluate the tax implications of your current 401(k), IRA, or other retirement accounts. Early tax planning (like considering Roth options) can pay off in the long run.

3. Lifestyle Choices

Spending Habits: A modest lifestyle requires less money; a travel-heavy or luxury lifestyle demands more. If you have worked hard to produce a good income and lifestyle during your career it may be undesirable to cut back significantly, which means the savings number you need to hit for your retirement may be a lot larger than 2 million. This is not a highly uncommon thing that I see as a financial advisor.
Your Spending: Track your current monthly expenses to understand how they might shift in retirement (or any future career change). One of the biggest risks people face in retirement or early retirement is over-spending. Very few people have a strong grasp of actually how much spending they need, and overdoing it early in retirement when you have to make withdrawals on your investments can have precarious implications to your retirement outlook
Younger Professionals: Start good budgeting habits now. The earlier you master managing your expenses, the less stress you’ll have in retirement.

4. Inflation and Investment Strategy

Inflation: Over time, prices go up. $2 million today might not hold the same value in 20 years.
Investment Strategy: Let's be honest, if you have 2 million and you hope to stick it under your mattress, you may be unlikely to succeed for a retirement that may last 30 years. Rising cost of living and healthcare and taxes all can eat away that value over time, so developing an investment plan suited to your withdrawal needs, risk profile, and unique plan is critical. Equity allocations have historically been a better inflation hedge than fixed income, but not without significant volatility to be considered in the portfolio construction process. Determining this balance in the retirement plan process should be unique and address all parts of your plan rather than a generic 1-10 risk profile where there is a one size fits all approach based on your age and number.
Younger Professionals: You have a longer time horizon to ride out market fluctuations— it is wise to take advantage of time which offers more opportunity for compound growth and potential to take more risks which can play out well if done thoughtfully.

5. Planning for the Unexpected

Emergency Fund: Life can throw curveballs—home repairs, family emergencies, sudden job changes. These can deplete savings if you’re not prepared. Having a contingency fund factors into how much you may need for retirement.

6. Making the Most of Your Nest Egg

Dynamic Withdrawals: Adjust your spending based on market performance and your personal needs. This requires careful monitoring but can help your portfolio last longer.
Tax Planning: Timely Roth conversions or strategically realizing capital gains can reduce your lifetime tax burden.
Working Part-Time: Easing into retirement with part-time work can provide extra income and keep you socially engaged.
Downsizing: Selling a larger home to free up funds and cut housing costs can be a game-changer for some retirees.

Key Takeaways

Personalization is Key: No two retirement plans look exactly alike. A $2 million fund might be more than enough for some—and insufficient for others.
Start Early, Plan Often: Building good savings habits, staying mindful of taxes, and picking the right investment strategy can make a significant difference.
Stay Flexible: As life circumstances change, so should your plan. Revisit and adjust your budget, tax strategy, and withdrawal rates regularly.
Seek Professional Advice: Planning can be complex and you may want to consult an advisor before making any big decisions, especially if you are planning for retirement. Feel free to check out video below here to learn more about our approach to financial planning: How To Retire with Potentially Thousands or More

Final Thoughts

Whether you’re decades from retirement or months away, the crucial first step is understanding your personal goals, lifestyle needs, and risk tolerance. Retiring with $2 million might be a reality—or aspiration—but either way, informed planning is what truly sets you up for long-term security.

If you have any questions or want personalized strategies, feel free to reach out or drop a comment. Remember, retirement is not just about stopping work; it’s about having the freedom to live life on your own terms.

My name is Joe Boughan, and I am a Financial Planner in the Greater Boston Area. I specialize in helping people plan for retirement as a fiduciary financial partner, and have several years' experience as a lead financial advisor working with people on their most important financial planning matters.