I'm 65 With $2.5 Million. Will I Run Out of Money?

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If you're entering retirement with a pretty negligible nest egg, it's natural to worry about running out of money. But if you've managed to save $2.5 million, you're in a very different situation.

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As of 2022, the median retirement savings balance among Americans ages 65 to 74 was $200,000, according to the Federal Reserve. So if you're 67 with $2.5, you're probably well ahead of many of your peers.

That doesn't mean you don't need to be careful, though. Even a large IRA or 401(k) could get depleted over time if you take money out randomly without a plan. But with a solid strategy, a $2.5 million nest egg might easily last as long as you need it to.

Establish a withdrawal rate that's safe

Even though $2.5 million is a lot of money, it's important to be mindful of how much you're spending each year. It's also important to adjust your spending as market conditions evolve.

The 4% rule has long been a popular withdrawal strategy. If you have a portfolio that's a mostly equal mix of stocks and bonds, you may want to follow it. If not, come up with a starting withdrawal rate that works for you.

But be prepared to be flexible. Reducing spending when the market is down could help you avoid permanent portfolio losses that put you at risk of running out of funds. On the flipside, you may be able to increase spending during strong market years to compensate.

Consider delaying Social Security

If you're retiring with $2.5 million, your savings might be able to cover a large chunk of your bills. But you might still need Social Security to supplement your withdrawals.

If you claim Social Security at full retirement age, which is 67 if you were born in 1960 or later, you'll get your monthly benefits without a reduction. If you wait beyond that point, you'll get an 8% boost for each year you delay, until you turn 70.

You may not need larger Social Security checks to cover your expenses month to month. But what a larger benefit does for you is allow you to withdraw less from your portfolio during market downturns. That could be instrumental in preserving your savings, especially if there's a market decline during your retirement that comes with a slow recovery to follow.

Even though $2.5 million is a lot of money, you have to be careful with it. But with a well-thought-out withdrawal strategy and delayed Social Security claim, you can put yourself in a strong position to hang onto your nest egg as long as you need that money.

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