Yes, it is possible to live off the interest of $2 million, but it depends on your lifestyle, expenses, and how the money is invested. If you were to invest in a diversified portfolio with an average return of 4%, you could generate around $80,000 annually in interest.
This traditional method dictates that you should withdraw 4% of your retirement funds, adjusted for inflation, to live on every year. So, if you have $2 million at retirement at age 60, you should be able to live on $80,000 per year, adjusted for inflation.
According to estimates based on the Federal Reserve Survey of Consumer Finances, a mere 3.2% of retirees have over $1 million in their retirement accounts. The number of those with $2 million or more is even smaller, falling somewhere between this 3.2% and the 0.1% who have $5 million or more saved.
Rich retirees: In the 90th percentile, with net worth starting at $1.9 million, this group has much more financial freedom and is able to afford luxuries and legacy planning.
This year's study reveals that Americans now think it takes an average of $2.5 million to be considered wealthy – which is up slightly from 2023 and 2022 ($2.2 million).
That's not chump change, but it's also not the $5-$10 million range some financial gurus – like Suze Orman – insist you must live comfortably. If you're dreaming of $3 million or more, though, you're officially aiming for a financial VIP club that represents less than 1% of retirees.
Your net worth is what you own minus what you owe. It's the total value of all your assets—including your house, cars, investments and cash—minus your liabilities (things like credit card debt, student loans, and what you still owe on your mortgage).
Probably 1 in every 20 families have a net worth exceeding $3 Million, but most people's net worth is their homes, cars, boats, and only 10% is in savings, so you would typically have to have a net worth of $30 million, which is 1 in every 1000 families.
Living off the interest of a $2 million investment is possible, but it depends on the interest rate and the person's expenses. Generally, a 4-5% annual return is a safe estimate, which would be $80,000-$100,000 per year.
As the phrase goes, “That depends!” If your portfolio averages a 4% return every year and your expenses stay static, $2 million should last a lifetime, no matter how many years that is.
That's about 6% of the population. So if there's 100 people standing in front of you, 6 of them might have $2M and you won't even know.
Americans say you need a net worth of at least $2.5 million to feel wealthy, according to Charles Schwab's annual Modern Wealth Survey, which surveyed 1,000 Americans ages 21 to 75 in March 2024. That's up slightly from $2.2 million, compared with last year's survey results.
Across those years, $2 million could equate to approximately $68,966 annually or $5,747 monthly. This should serve you incredibly well and make you feel comfortable and cushioned, especially if you have relatively low expenses as a retiree and a normal lifestyle.
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In 2024, Americans stated that the average net worth they consider “wealthy” is $2.5 million. That's up by $300,000 over last year, when Americans said $2.2 million qualified you as rich.
What are the average and median retirement savings? The average retirement savings for all families is $333,940, according to the 2022 Survey of Consumer Finances. The median retirement savings for all families is $87,000.
For example, one rule suggests having a net worth at 70 that's equivalent to 20 times your annual expenses. If you spend $100,000 a year to live in retirement, you should have a net worth of at least $2 million.
According to some experts, the optimal range for home-ownership is between 10% and 30% of your net worth. Rental properties and passive income: Rental properties are another common and attractive form of real estate.
Should Your Net Worth Calculation Include Your Car? When calculating your net worth, subtract your liabilities from your assets. Since your car is considered a depreciating asset, it should be included in the calculation using its current market value.
For example, a common rule of thumb is to have a net worth equal to one's annual salary by age 30, doubling that amount by age 40, and reaching five times the salary by retirement age.
Data from the Employee Benefit Research Institute, which utilizes the Federal Reserve's Survey of Consumer Finances, indicates that only about 0.1% of retirees have over $5 million saved for retirement. Additionally, about 3.2% have savings exceeding $1 million.
“For example, if you retire with $3 million saved, you would start withdrawing $120,000 in the first year and adjust this amount for inflation thereafter,” he said. To stretch your money further, Kayikchyan said you can consider withdrawing less than $120,000 annually.
Ultimately, $2.5 million can reasonably support retiring at 60 if assumptions around withdrawal rates, taxes, healthcare costs and other factors hold up. Being flexible about expenses and having some income options as a potential backup provide wiggle room in case things don't work out exactly as expected.