Ep 76 | Is $5M Enough to Retire?
In this episode, Priya tackles the retirement number most high earners have been quietly aiming for - $5 million - and asks whether it actually holds up. She walks through inflation, lifestyle replacement vs. salary replacement, the Fidelity healthcare estimate, and the variables that shift the math most: when you retire, whether you keep earning, and what strategy you're actually comfortable with.
Takeaways:
You're not replacing your salary in retirement - you're replacing your lifestyle, and for high earners those are two very different numbers.
Most high achievers don't stop working in retirement - they change how they work, and even $50-75K in flexible income can shift your retirement target by millions.
Blindly maxing retirement accounts without knowing your actual number might mean you're compressing your current lifestyle for a target you don't even need.Follow Priya Malani:
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Stash Wealth is a Registered Investment Advisor. Content presented is for informational and educational purposes only and is not intended to make an offer or solicitation for any specific securities product, service, or strategy. Consult with a qualified investment adviser (that's us) before implementing any strategy. Investing involves risk, including the loss of principal. Past performance does not guarantee future results. There…we said it.
Transcription
You're not trying to replace your salary. This is actually a pretty common thing people miss. You're actually trying to replace your lifestyle. Those are two very different things. Because if you're making $300,000 today, some of that money is going towards things that likely won't exist in retirement.
So before we even ask is $5 million enough, we have a much better question to ask. Enough for what? Who the am I to tell you what to do with your money? My name is Priya Malani, currently managing millions of hardworking dollars. Enough foreplay. Let's talk money. Welcome to the F Word: Smart Money, No Bullsh*t.
The $5 Million Number — Where It Came From
Hey guys, welcome to the F Word. 10 years ago, the most common retirement target 30-somethings were aiming for was about a million dollars. Now, the number I hear most often is $5 million. I'm not sure exactly when that switch happened, but when I ask people where that number came from, it's usually pretty clear that it was pulled out of thin air.
Now, to start, I don't have a huge problem with that number. In fact, when we run financial plans for our clients, the number usually ends up somewhere between $4 and $9 million. So at least we're in the right ballpark. But still, that's a pretty massive range with dramatically different lifestyles attached to it.
And I do pause when I think about how insanely preventative we are about wrinkles and how oddly indifferent we are about something one would argue is more important, keeping your lifestyle intact when you stop working. Because if you're making good money, especially making 200,000, 300,000, $400,000 a year, you're gonna earn the right to stop hustling at some point, and it's up to you to prepare for it.
So if you're sitting here thinking, "Yeah, I'm probably shooting for about $5 million, but haven't really thought about it much because it's decades away," today's your day. I'm gonna break down what a $5 million retirement actually looks like, what variables matter, and how to find the right number for you, because I will say that blindly maxing retirement accounts without understanding the target might mean you're compressing your current lifestyle unnecessarily.
And for high earners living a big life in a big city, that's a trade-off at least understanding. Let's get into it.
So Are You Even Saving for Retirement?
Before we start throwing around retirement numbers, are you actually saving for retirement? I don't mean money sitting in a high yield savings account or cash sitting in a checking account, and I definitely don't mean a brokerage account where you occasionally convince yourself you're a day trader I'm looking at you, Robinhood.
Retirement money is totally different. This is money you intentionally set aside that will sustain your expenses in the future. It becomes your income, and you build it usually inside a 401(k), a Roth IRA, maybe a brokerage account as long as it's earmarked and invested properly for retirement. If I just lost you and you're sitting here thinking, "Honestly, I'm making good money, but I still don't really understand my 401(k)," go back and listen to episode 74.
I break down maxing your match versus maxing your 401(k). Those are very different decisions. For today, I'm gonna assume you're contributing to some degree. Maybe not maxing, but you're participating in some way, even if your employer opted you into their plan and you never really looked at it. Because if we're talking about a $5 million target, we first need to make sure there's actually money heading towards retirement.
What Does $5 Million Actually Look Like?
So what does $5 million actually look like? I wanna talk next about what $5 million buys you in retirement, because I think this can get a little bit confusing. When most people think about retirement, they think in today's dollars, meaning you make good money today, you spend a certain amount of money today, and you assume your future lifestyle will cost roughly the same.
But retirement math doesn't work in today's dollars, it works in future dollars. I'm gonna explain. If you're 35 today and planning to retire around 65, talking about 30 years from now, at a pretty normal inflation rate, call it around 3%, the cost of things will double roughly every 24 years, which means a lifestyle that costs $150,000 a year today could cost closer to $300,000 a year in retirement.
That's the first thing people miss. The second thing people miss, you're not trying to replace your salary. This is actually a pretty common thing people miss. You're actually trying to replace your lifestyle. Those are two very different things. Because if you're making $300,000 today, some of that money is going towards things that likely won't exist in retirement.
Maybe the mortgage is gone. Maybe the kids are financially independent. Maybe you're no longer saving aggressively for retirement because you're retired. But other costs may go up. You might travel more. Healthcare usually becomes a much bigger line item. And if you retire before Medicare kicks in at 65, private health insurance, we all know, can be expensive.
Fidelity estimates that the average 65-year-old couple may need roughly $350,000 just for healthcare costs in retirement, and that number surprises a lot of people. So before we even ask is $5 million enough, we have a much better question to ask. Enough for what? What kind of lifestyle are you trying to preserve?
Because if your goal is, "I want future me to live roughly the way current me lives," you need to know that. We need to understand what that lifestyle costs and what it might cost later. Without that step, the number just vibes. So let's make this practical. Let's say you're 35 today making $300,000 a year.
You want a retirement lifestyle that feels pretty similar to what you're living now. Maybe the mortgage, retirement savings, and kid expenses fall away. That lifestyle costs the equivalent of roughly 220 to $250,000 a year in retirement dollars. Depending on when you retire, how aggressively you're invested, whether you plan to keep earning in some way, and how comfortable you are spending your principal down, $5 million could absolutely be enough, or it could fall short.
And that's my point. The number itself isn't wrong, it's just incomplete without knowing what assumptions are behind it.
Real quick, if you've ever seen your paycheck hit your checking account and thought, "Where the hell does it all go?" You're not alone. If you're in your 30s making six figures, it's time to get your financial sh*t together. Go to stashwealth.com and book a call. All right, back to the episode.
The Variables That Change Everything
So now let's talk about the variables that change everything. Let's talk about the assumptions, the things behind the math, so we can get you closer to your number. Unfortunately, retirement calculators online love to pretend everyone retires at 65, stops working forever, and quietly fades into their gardening era.
This is not most people I know listening to this podcast. So first variable, when you retire. If you retire at 65, very different math than retiring at 55. Retire early and your money has to last longer. That sounds obvious, but if you've been attached to a number without understanding the assumptions behind it, there's a decent chance you're aiming at the wrong target.
Second, will you keep earning? And before you say, "No, I wanna retire," do you? Because most high achievers I know don't stop working, they just change how they work. Consulting, advising, sitting on boards, teaching, or some totally random passion project that you inevitably turn into a business because you're a high achiever.
Even if you're making 50 to $100,000 a year in flexible income, that changes your math. If your retirement lifestyle costs quarter million a year, but consulting covers 75,000, that's $75,000 a year that your portfolio no longer has to generate over decades. So over a retirement horizon, that can change your target by millions.
Third, what strategy are you actually comfortable with? Because when most people are planning for retirement, they're not actually thinking about how they wanna spend the money once they get there. Makes sense. You're in your 30s. However, at that point, there are going to be options. You might wanna draw down on principal.
Some people like that. Others hate the idea of touching it. Some want their last check to bounce. Others wanna preserve wealth for family. No decision is wrong, but there is no default, and the intention behind your strategy can dramatically change your target. Needless to say, the big takeaway is you have to sit down and think about it.
Best Bite
Okay. Hope that got you thinking. Before I let you go, I always end with a segment called Best Bite. I'm a big foodie, and I love to share a recommendation of something that I've had recently that just blew me away. This one comes from some time I spent recently in Greece on an island called Paros, and it's a cocktail I had at a little spot called Christo's Gastro Bar, where you can sip cocktails while your toes literally touch the Aegean Sea.
Now, I know what you're thinking. Wouldn't everything taste amazing if that was the case? And you're probably right. Anyway, this drink is called the Golden Fizz, and it's a cross between, like, a dirty martini and an Aperol spritz. No Aperol, but it had olive bitters in it that took it to the next level. It was awesome.
So if you happen to find yourself in Paros, I highly recommend the Golden Fizz cocktail at Christo's Gastro Bar.
Okay, so we started today by asking is $5 million enough to retire? The answer is maybe. For a lot of my listeners, it's probably somewhere in the ballpark of that four to nine million. But hopefully what you're leaving with today is your retirement number should not be pulled out of thin air.
And without taking the time to really think about it, you might be compressing your lifestyle today for a target you don't even need. That's not the goal. The goal is confidence to have a plan and understand why you're building what you're building. If you know someone, maybe your partner, who needs to hear this, I hope you'll share this episode with them.
If you haven't already, please like, follow, and subscribe so you don't miss future episodes, including one coming on retirement planning with a partner, because that actually changes the math in ways that deserve its own conversation. And as always, remember you're a high earner, and that means high potential for achieving the financial freedom that you're after.
All right, that's it for today. See you next time.
Thanks for listening to The F Word with Priya Malani. If you like what you heard, hit subscribe wherever you're listening, and leave us a review while you're at it. We're approval junkies. Don't forget, you can find a ton of great resources, content, courses, and other freebies at stashwealth.com. Now, for the capital S stuff our lawyers want us to say.
THE STUFF OUR LAWYERS WANT US TO SAY: Stash Wealth is a Registered Investment Advisor. Content presented is for informational and educational purposes only and is not intended to make an offer or solicitation for any specific securities product, service, or strategy. Consult with a qualified investment adviser (that's us) before implementing any strategy. Investing involves risk, including the loss of principal. Past performance does not guarantee future results. There…we said it.
