Is 4 Million Enough to Retire at 55

Is $4 Million Enough to Retire at 55?

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We all hope to have a comfortable retirement so we can enjoy all the things that took a backseat during our working years.

For that to happen, we need to have enough money saved up. However, if you're used to a particular way of living, you could require slightly more than the bare minimum which is typically 7 times your annual earnings. 

Will $4 million do?  With careful planning and investing, yes. 

A good majority of retirees may live well with a nest egg of $4 million, which also allows them to do anything they want in general.

But before you can retire guaranteed that $4 million will be enough for your retirement, there are several specific chores you'll want to accomplish. We also advise that you talk to your financial consultant to get more information.

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Diversify Your Portfolio to Protect Your Wealth

Never put all your eggs in one basket, so protect your savings by diversifying. Diversification produces more consistent, dependable returns over the long term by reducing the volatility within financial holdings. 

Since 2008, millions of Americans have realized that merely diversifying their stock assets is insufficient. That's because most of them have, at one point or another, lost their retirement investments as a result of financial and economic problems.

We all wish for a swift and sustained recovery, but a wise investor must be aware of the ongoing dangers to paper assets.

These include:

  • High levels of domestic and international government debt
  • Out of control inflation
  • Quantitative easing
  • Declining value of the US dollar
  • Geopolitical tensions

To be safe, smart financial advisors recommend distribution across three investment sectors within the tangible assets category. Due to the distinct financial advantages that each asset class offers, this distribution is the most profitable over the long run.

To maximize security, different types of bars and coins can be used in short-, medium-, and long-term holding strategies. 

Because precious metals are not correlated to traditional asset classes like stocks and real estate, it is the safe-haven asset of choice for governments, private organizations, and now, individuals.

A precious metals IRA,  in which actual, physical metals are housed in your account, naturally possesses the qualities that make precious metals a secure investment. 


One key thing is that the value of precious metals can never be reduced to zero, unlike paper assets, which could lose value in the event of a future crisis.

Knowing that your retirement savings are kept in a secure bank vault is truly the only thing that can bring you peace of mind.

What is a Physical Precious Metals IRA?

Just to reiterate, putting all of your financial eggs in one basket can be dangerous. You can lose a sizable portion of your assets when the economy experiences boom-to-bust cycles.

This is why some of Wall Street's wealthiest investors, like Ray Dalio the founder of Bridgewater, the largest hedge fund in the world recommend owning some gold.  

a couple listening to a financial advisor

Depending on your investing preference, the standard allocation of precious metals in a portfolio is between 5% - 15%.  The most tax efficient way to invest in physical gold and silver is with a precious metals IRA. 

It is a special form of self-directed individual retirement account. It is a retirement plan that gives you control over physical assets, commonly referred to as a gold IRA or a silver IRA.

By setting up such an account, you can take advantage of the tax benefits of a traditional IRA. You can also take charge of your financial destiny by safeguarding your investments with tangible assets, such as real gold bars and silver coins.

Gold IRAs are a reliable way to safeguard your retirement.

Create a Financial Plan

In many endeavors, failing to plan is planning to fail. That's why financial plans are vital. Planning for retirement is essentially long-term planning. 

There is a 3% rule that states that you can withdraw 3% of your overall retirement funds during your first official year of retirement. 

man looking at a clipboard

Following that, you are allowed to keep withdrawing the same amount at an inflation-adjusted value. With this plan, your portfolio should last for at least 30 years. Let's use your retirement sum to work out the details:  

Let's assume that you plan on having $4 million in retirement savings. With that objective, and with our aforementioned strategy, you get to withdraw $120,000 in the first year (.03 x $4,000,000).

In subsequent years, inflation comes into play. Let's say, for example, that the rate of inflation was 2% (historically 2% was the standard number to use, now, not so much) in your second year. In that case, your withdrawal would be $122,400 (.03 x 1.02 x $4,000,000).

Well, this strategy will only work if your yearly budget allows it to work. What does that mean? — Essentially, if $120,000 a year for the term of retirement is insufficient for you, it will not work.

That's why you must first create a budget. With a retirement budget, you can have a plan that caters to your needs. 

To create a realistic budget, keep track of your spending. This should evaluate daily, weekly, and monthly spending and cover a period of at least half a year. Your budget should take the following into account:

  • Essential living expenses (such as food and utilities)
  • Healthcare costs
  • Leisure activities
  • Travel

After evaluating this, ask yourself, "Will my projected spending take me through retirement?"

You should also think about adjusting some spending to increase your savings. Remember that the rate of incoming money is far much lower than your working years.

Reduce Your Living Standards and Expenses

Your priorities change as you age, and so should your lifestyle. The large house you purchased to accommodate a family of four gets a bit excessive. The things you put inside it just clutter it up.

Moreover, with aging, comes mobility issues and, if you have movement issues, such a big house may be inconvenient.

Historically, it was natural for seniors to downsize. Some downsized and relocated to communities for active adults, while others bought smaller homes to be nearer to their loved ones. However, things are changing right now.

Even though some are downsizing, most Baby Boomers prefer to remain in their homes. Chase Bank conducted a poll in 2019 that included 13,000 households (2,826 belonged to Baby Boomers).

Of these 42 percent expected to stay in their current residence after retirement. 

Well, you may also share this sentiment and it's understandable. But bear in mind that you still have the option to reduce your expenses and save cash without having to move. Consider your current way of life instead.

Reconsider your spending and, when possible, find other uses for your money. For instance, you can decide to sell your automobile and use public transit, or you might select environmentally friendly things to do at gatherings.

Create a Source of Passive Income

Retired folks have a lot of job options besides their mainstream profession. They can participate income generating activities, which means that they would be actively working on the side with something like business consulting.

The IRS has requirements for what constitutes material participation, like working more than 600 hours in the trade or company.

stack of gold coins

In this case, retirees can earn money as commission, pay, bonuses, and tips. 

The other option is to create passive income. There are two types of passive activity:

  • Any skill or business that doesn't match the requirements of material participation
  • Rental properties (except if you are a realtor)

Whichever the case, passive income is one strategy to increase your retirement savings. There are many different ways to generate passive income. Some include video channels, e-books, blogs, side hustles, and rental income.

You could also invest in an asset with very little risk like a high-yield savings account or take on more risk by owning a dividend stock. It is worth noting, however, that passive income isn't completely hands-free.

Moreover, if you want to retire with millions, real estate and reinvestment might be your safest bet.

Get Rid of Debt

Debt is the destroyer of happy and secure retirement comfort. 

Today, many households are forced to retire with debt hanging over them. Debt has increased dramatically over the past few decades, especially among elderly Americans. 

According to a 2018 Congressional Research Service research, 38 percent of families with a head who was 65 or older in 1988 had debt. By 2016, it had almost doubled to 61 percent.

To make matters worse, the average value rose from $28,918 (inflation-adjusted) to $90,102.   This is partly due to the surprising fact that costs tend to rise as people approach retirement.

When someone applies for a credit card or buys a retirement home, they incur additional debt. When people discover they haven't saved enough, they also make rash decisions.

Be cautious to avoid making snap decisions right away. Moreover, avoid making risky bets in the late stages of the game. You should also alter your asset allocation and diversify your investments as you get older.

That can entail early debt consolidation or paying off debt that has a high-interest rate to get a reduced interest rate.

Move to Where Your Retirement Money is Treated Best

Did you know that some states are better than others for retirees? Of course, it would be a drastic change, but it can do you a lot of good in your later years. It can help lower your taxes and your cost of living.

For example, the following states do not impose a tax on retirement income. Others provide a sizable tax deduction for such income. They also offer reasonable tax rates for stuff like inheritance, real estate, and sales tax.

The most retirement friendly states are:

  • Alaska
  • Florida
  • Georgia
  • Mississippi
  • Nevada
  • New Hampshire
  • South Dakota
  • Tennessee
  • Texas
  • Washington
  • Wyoming

However, you might also wish to consider states that don't impose income taxes on your Social Security benefits. Currently, only 35 states do not impose this kind of tax. Additionally, they provide a deduction for all or a portion of retirement income. 

If you're up to the task, you might even think about relocating abroad. Some nations, like Costa Rica, Portugal, and Malaysia, are among the least expensive destinations to retire to. By relocating, you might enjoy an adventure as you learn about various cultures.

Before making any judgments, however, we advise that you do your due diligence on issues like tax ramifications, requirements to become a legal resident and health insurance.

Minimize Your Taxes

Your finances could suffer as a result of taxes. You could however save money on taxes by moving to a much lower tax rate. Making charitable donations is one strategy to lower your taxable income.

You can lower your taxes by donating to an eligible organization, but it's best to work with a tax professional to do this correctly. 

cartoon of woman looking at taxes and a calculator

In this regard, you could deduct up to 50% of your adjusted gross income. Some wealthy people also establish conservation easements. 

In doing so, one can collaborate with a conservation land trust and claim a deduction for charity based on the property's worth.  

Don't forget to utilize your gift and estate exemptions also. Along with your inheritance tax exemption, the gift tax exclusion for 2022 is $16,000 yearly (up from $14,000 in 2020) and $11 million in your lifetime (up from $9.3 million in 2020).

However, there are numerous strategies to lessen your tax liability. For example, you are permitted to contribute to your Health Savings Account, FSA, or retirement account up to a specific maximum.

Alternately, you may invest in something pretty safe like muni bonds. Interest on municipal bonds grows tax-free.


The bottom line is that there are many elements to take into account while preparing for retirement, making it a difficult balancing act.

Making the necessary preparations for retirement, however, will be easier if you have a clear financial objective and plan in place.  You can use the steps listed above as a general guide to assist you to start your retirement planning journey.

But if you run into trouble or just need some advice from an expert, think about talking to a financial counselor in your local area. A financial advisor can help you navigate the process and provide strategies for advancing your retirement objectives.

Keep in mind that there is no ideal formula for determining your retirement savings goal. The performance of your investments can fluctuate over time, and it can be challenging to predict your real income requirements.

It's also important to note that not all retirement plans have the same earning potential. Money withdrawn from a 401(k) or traditional IRA is considered taxable income. 

Conversely, any money you withdraw from a Roth 401(k) or Roth IRA is typically not subject to any taxes, which could somewhat alter the computation.

There are also other unforeseen potential factors to consider as well. Many employees, for example, are forced to retire early in the face of calamity. For instance, the COVID-19 epidemic caused roughly 3 million workers to retire sooner than they had planned. 

Older workers frequently have to retire early owing to layoffs, health issues, or caregiving responsibilities even in normal times. That's why you need a safety net by saving for a lengthier retirement than you had anticipated.

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