There are many people who struggle to save for retirement, period. So if you're on track to retire with a $2 million IRA, you should consider yourself ahead of the game.
On the other hand, you shouldn't assume that $2 million will automatically buy you the retirement you want. It's important to figure out the math behind your retirement expenses to see if your savings need a boost, or whether you can coast.
While $2 million is certainly a lot of money, do remember that it may need to last for 20 years or longer. If you're retiring on the early side, you may need to plan for a 30-year stretch.
The first way to know if you're all set with $2 million is to figure out a withdrawal rate you're comfortable with. If you're willing to use the popular 4% rule, a $2 million nest egg gives you $80,000 a year, not including inflation adjustments.
Now you'll probably qualify for Social Security as well. The average benefit today is $2,086, which amounts to roughly $25,000 a year.
If you managed to save $2 million for retirement, it means you may be eligible for a larger benefit. So we'll assume your annual Social Security income is $40,000 instead.
All told, that gives you an annual retirement paycheck of $120,000. Is that enough? Well, that depends on you.
If your recurring expenses aren't super high, a $120,000 annual income could easily be enough money to pay for entertainment, some travel, and other things you want to do once you stop working. But if you own a home with a mortgage and large property tax bill, and your insurance and utility bills are high, you may not be able to maintain the lifestyle you want on $120,000 a year.
For some people, a $2 million IRA might more than suffice. For others, it might fall short. It's important to compare the amount you've saved against your specific needs before deciding whether it's actually enough or not.
Of course, either way, retiring with $2 million means that you should hopefully be able to avoid financial struggles. So it's really a matter of whether that sum allows you to enjoy the lifestyle you're hoping for.
If that's not the case, the sooner you figure it out, the more time you might have to ramp up on savings and set yourself up to retire with a larger total.
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