Do you need $1 million to retire? Can a couple retire with $2 million, or do you actually need $5 million? Ultimately, when it comes to a personal savings goal for retirement, the goal is just that — personal. We all have a different conception of what an ideal retirement looks like. While an average nest egg may be more than enough for a couple with relatively modest expenses, it might fall short if you have big plans in retirement.

But let’s ballpark some figures. What kind of retirement can $2 million provide?

WHAT IS YOUR COST OF LIVING IN RETIREMENT?

This begins with envisioning your retirement lifestyle. Are you planning to tour the world, or will you stay close to home and babysit the grandkids? Will you take up an expensive new hobby, or bury yourself in books from the library?

Share your vision for retirement with your partner and listen to theirs. Once you’ve got a sense for the way you’ll spend retirement, you’ll be able to approximate your expenses.

Now for the big question: Can a couple retire with $2 million? Following the 4 percent rule for retirement spending, $2 million could provide about $80,000 per year, which is above average. The Bureau of Labor Statistics reports that the average 65-year-old spends roughly $3,800 per month in retirement — or $45,756 per year.

Of course, these are all “back-of napkin” calculations. It may be beneficial to reach out to your advisor to hone in on more precise projections to fit your situation.

HOW WILL YOU GENERATE INCOME IN RETIREMENT?

Once you’ve clarified your retirement goals and estimated the costs to get there, the other side of the retirement planning coin is income. Retirement income takes many forms and goes beyond your 401(k) and IRA balances. On top of these investment accounts, you’ll also want to look to secure guaranteed sources of income to cover basic living expenses. Guaranteed income could come from pensions you or your partner may have, as well as:

  • Social Security benefits: You can technically begin claiming Social Security at age 62, but you’ll pocket more each month if you can hold out longer. After reaching your full retirement age, you can expect an 8 percent benefit increase for every year you postpone it up to age 70.
  • Whole life insurance: A whole life insurance policy accumulates cash value over time, which is guaranteed to grow. You could access your accumulated cash value in retirement to supplement your income when you’re no longer working.
  • Annuities: Income annuities can provide a steady, reliable stream of income month after month in retirement. After purchasing one from an insurer, you’ll receive regular payments in retirement — generally for the rest of your life.

Guaranteed retirement income will add some stability to augment whatever you’ve set aside in your investment accounts that are exposed to market volatility. If the bulk of your nest egg is tied up in investment accounts, and the market takes a dip during retirement, it may require a strategic rethink. That’s why it’s so important to diversify your sources of income in retirement.

On that note, cash reserves make up another important piece of the puzzle. Financial experts generally recommend keeping two years’ worth of income in a liquid savings account that you could tap in an emergency. Think of it as an additional layer of protection against market ups and downs.

Regardless of how much you save, your goal is to save enough to support a lifestyle that suits you. Can a couple retire with $2 million? It’s certainly possible, though it really comes down to creating a retirement savings plan that’s tailored to you and your partner. Syncing up with the right financial advisor can help you make a customized road map.

The primary purpose of permanent life insurance is to provide a death benefit. Using permanent life insurance accumulated value to supplement retirement income will reduce the death benefit and may affect other aspects of the policy. Income annuities have no cash value. Once issued, this annuity cannot be terminated (surrendered), and the premium paid for the annuity is not refundable and cannot be withdrawn.

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