How Much You Need to Save to Retire With $5 Million

Accumulating a $5 million nest will require saving each month somewhere between a few thousand dollars and a few tens of thousands of dollars, with the difference depending mostly on your age when you start. Other factors include your age at retirement, investment returns and taxes. While $5 million will fund a comfortable and secure lifestyle, getting there won’t be easy. A financial advisor can help you craft a retirement savings plan for your specific needs.  

The first step to save for a $5 million retirement nest egg is to set clear financial goals and establish a budget to allocate a portion of your income towards that retirement savings regularly. You can do this by estimating how much you need to save monthly throughout different stages of your lifetime.

Using SmartAsset’s retirement calculator, we assumed that you start with a single dollar of savings and expect to earn an average of 5% compounded annually. The table below estimates how much you’ll have to save roughly each month starting at age 25 to reach that $5 million retirement goal.

Starting age is obviously a major consideration. Waiting 10 years from age 25 to age 35 nearly doubles the monthly amount you’ll have to put away. That’s due to the power of compounding interest over a decade. The longer the time period, the more impact compounding has. Wait 30 years until age 55, and you’ll need to put away nearly nine times as much to hit your $5 million goal.

It may not be realistic, however, to save nearly $2,000 a month when you are just starting out. Alternatively, you could plan to save a percentage of your earnings every month. As your career progresses and your income rises, so will the amount you save. Many advisors recommend saving between 10% and 15% of your salary. For this plan to work, you’ll have to maximize your earnings.

Age at retirement also matters a lot. If you start saving at 25 and plan to retire at 67 instead of 70, for example, you have to save $2,288 instead of $1,910. If you want to quit working at 62, increase your savings to $3,130 a month.

Investment return is another key variable that is hard to predict. Investment return forecasts range from a reliable zero percent if you keep your money under the mattress to a historical average of nearly 10% if you invest in the S&P 500 stocks.

A 5% percent annual average return like the one used in the example above is on the low side of what is considered a good return on investment. If you use an estimate on the high end, you can save less. For example, with a 7% average return, the hypothetical 25-year-old would only have to save $1,130 every month instead of $1,910.

Taxes represent another significant factor. Individual retirement accounts (IRAs) and similar tax-deferred retirement savings accounts let you deduct contributions from current income and also grow investments tax-free. However, in most of these scenarios you will have to put away much more than the caps on contributions to most retirement accounts in order to accumulate $5 million. As a result, much of your investment earnings likely will be taxed. This will reduce the effective return, a phenomenon called tax drag.

Taxes rates, like salaries and investment returns, can’t be predicted with accuracy. A 2024 IRS report on 2021 tax returns shows that the average rate, computed by dividing total income tax by adjusted gross income, came to 14.9%. The average masks a wide variation. Federal tax brackets start at 10% and go up to 37%. Even at the indicated average tax rate, however, tax drag slows the accumulation of $5 million.

Employer matching represents another wild card. Some companies match employee contributions to retirement savings plans up to a specified amount. Employer matches, when available and used to full advantage, can help speed the growth of a savings account.

Before you plan to devote a large percentage of your earnings to retirement savings over your entire working life, you may ask whether it will be worth it. A $5-million nest egg will fund a comfortable lifestyle by most standards. Using a 4% withdrawal rate, you could have $200,000 to spend annually and be reasonably sure that you would not run out of money during a 30-year retirement. If invested in risk-free U.S. government securities, $5 million could generate $100,000 in income for the foreseeable future. If you can live on that, you would never have to spend any of the principal.

While the general attitude toward retirement savings is that more is better, some research suggests there is such a thing as enough, or more than enough. A 2023 update of a 2018 study of more than 1,500 retirees by investment firm Blackrock and the Employee Benefit Retirement Institute (EBRI) found most appeared to have saved more than necessary.

Across all income groups, after nearly 20 years of retirement, most retirees surveyed still had 80% of their pre-retirement savings. A third weren’t spending down their savings at all and, due to investment earnings, had actually accumulated more after they stopped working. With this in mind, it may be worthwhile to ask whether saving $5 million is a goal you want to pursue.

Saving $5 million by retirement is possible if you start early, save a lot, invest well and have some good luck. Many variables must be considered, including when you start, how much you can save, the return your investments earn, when you plan to retire and how well you manage taxes. No matter how you approach it, a plan like this requires discipline and commitment.

• Long-term plans like saving for retirement can benefit from the insight of a financial advisor. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• SmartAsset’s Social Security calculator can help you estimate how much your government retirement benefits will be once you claim them.

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