How to retire with 2 million dollars

For many years, financial experts have suggested that $1 million should be the target savings for individuals planning for retirement. However, this notion may not be relevant in today’s changed circumstances.

The world is amid an inflation hike, with the Middle East ranking as the region with the second-highest inflation rate of 13.2%⁽¹⁾ in 2022. Increasing rents, home prices, and healthcare and insurance costs are contributing to a rise in the cost of living. At the same time, people are living longer than ever before. The average life expectancy⁽²⁾ for individuals in the UAE in 2022 was 78 years. Three decades ago, it was 73 years, and in 1970, it was just 60 years. The difference of just a few years can have a major impact on an individual’s savings, especially if they still plan on retiring around the same time that people did several decades ago.

Most agree that we need more savings today for retirement than our parents’ generation did. But how much do we actually need? What if we double that $1 million goal to $2 million? Let’s look at whether or not $2 million is enough to retire and how to ensure that you’re financially secure in your retirement.

Is two million dollars enough?

Before we dive into what you need to know to retire with $2 million in the bank, it’s important to ask the question: Is that amount enough? Like most financial questions, there isn’t a clear-cut answer. 

How much you’ll need to live comfortably in retirement depends on a number of factors, which vary from one person to the next. Even the age at which you plan to retire is subjective. The amount of money that will be enough for one individual to retire at age 65 might not be enough for someone who hopes to retire by age 40 or 50. Your lifestyle, how you plan to spend your retirement, whether you’ll own a house, and other factors will also define how much you’ll need when you leave your career behind.

Configuring your retirement amount

In order to figure out whether or not $2 million would be enough for you to retire on, it’s important to take some time to configure your retirement amount — how much you need to maintain the lifestyle you want after you no longer earn from a career.

Start by estimating your retirement budget. This hypothetical budget should factor in any expenses that you might have, including:

• Housing costs
• Utilities, on average
• Food and entertainment
• Transportation, such as car payments or public transport costs
• Medical or healthcare spending
• Money you know you’ll spend on a hobby, travel, pets, or your family

Once you’ve calculated how much you’ll spend in a month, calculate what that will cost you each year. Finally, consider how much you already have saved and the age at which you’d like to retire, to determine how much you might need.

How to retire with 2 million dollars

Now that you’ve analyzed how much you’ll need to live comfortably in retirement, it’s time to implement a plan and a strategy to get there. Let’s look at a few ways you can retire with $2 million in the bank.

The power of compounding

The best thing you can do, whether you want to retire with two million dollars or much more than that, is to start saving today. The sooner you start saving, the more time your money will have to grow and compound. The power of compounding means that the more time your money has to grow, the more compound interest you’ll receive. 

If you have your heart set on retiring early or are getting a late start on your retirement savings, find areas within your current budget that you could reduce in order to put more money into your savings.

Diversify your portfolio

Another important strategy to ensure you can retire with two million dollars in the bank is to diversify your investment portfolio. That will help you avoid losing large sums on a bad stock or investment and maintain your savings when the stock market dips.

Increase your savings alongside your income.

Finally, as your income grows, ensure the percentage you are investing increases as well. As a general rule of thumb, most financial advisors suggest saving 10-15% of the earnings. That means, as your career advances, you’ll be saving more annually as well.

Whether or not two million dollars is enough for retirement depends on your personal goals, lifestyle, and when you plan to retire. But no matter your age, goals, or the amount in your savings, the best thing you can do is start planning for retirement today.

1. https://www.statista.com/statistics/1325670/inflation-rate-continent/
2. https://www.macrotrends.net/countries/ARE/uae/life-expectancy