I’m turning 50 this year and am realizing the $10 million is not enough to retire – how I need to adjust my portfolio?

Retirement planning is a process. It’s very rare that a retirement plan will last all the way through retirement. You must constantly readjust! Recently, I came across this very concept in a Reddit post. 

The original poster shared their ambitious plan to retire in 2025 with a net worth of $9M. The poster outlined some high annual expenses, significant travel plans, and clear investment concerns. 

I’ll break down her situation and offer some insight. Remember, this is just my opinion and not financial advice.

24/7 Wall St. Key Points

• Retiring in a very high-cost-of-living area can be challenging, even with millions. Throw in a big travel budget, and reaching those goals early can seem nearly impossible. 
• Luckily, every retirement budget can be adjusted to make it more plausible! 
• Also: Are You On Track to Retire? Take This Quiz and Find Out ^(Sponsored)

1. Navigating Large Cash Holdings and Market Timing

The user is concerned about reinvesting cash holdings during a high S&P 500 market. While waiting for a correction feels intuitive, it’s nearly impossible to predict market movements accurately. I absolutely do not recommend trying to time the market except in very extreme cases, which this is not. 

I’d recommend investing all $2.4M right now. While you can do dollar-cost averaging instead, just investing all at once typically performs better, even if it is a bit anxiety-inducing. 

Diversify, diversify, diversify. Consider diversifying into other asset classes like international equities, REITs, or alternative investments. Overinvesting in tech stocks is very common and something we recommend against a lot. 

2. Managing the $3M Home

Building a dream home with a $160,000 annual cost of ownership creates a significant financial strain on the poster’s budget. Selling this house might be the best option, especially since the user plans to travel lots, anyway. 

Selling after completion could free up significant capital while avoiding high maintenance costs. The user could then downsize strategically by investing in a smaller, more affordable property. 

If the user wants to retire comfortably and travel, the house may be something they have to give up.

3. Addressing High Retirement Expenses

Currently, the Redditor projects that her annual expenses will be around $365,000. This is exceptionally high, even with a robust net worth. Expenses like $100,000 for travel and $60,000 for rent (if they sell their current home) stand out. These expenses are huge, but the poster has emphasized that she cannot decrease her travel budget. 

Still, I’d recommend that everything in the budget truly aligns with her overall retirement goals (such as the high housing cost). 

I’d also recommend looking into high-deductible health plans (HDHPs) paired with HSAs to mitigate potential spikes in costs. Healthcare is extremely expensive in early retirement.

4. Is $10M Enough to Retire?

The user’s $10M target net worth and high expenses stretch the 4% safe withdrawal rule, especially considering inflation and market fluctuations. 4% is a bit high for early retirement, too. I’d recommend aiming for something closer to 3%.

Based on this, I’d recommend aiming for at least $12M. This may involve extending their working timeline or maximizing real estate profits. Either way, she needs to increase her retirement savings, especially if the budget isn’t cut back. 

5. Reviewing Investment Strategy

The poster raises concerns about her current investment mix, and I’m concerned about balance issues, too. 

I’d recommend lowering exposure to tech stocks by diversifying into other sectors. Tech stocks are very volatile, and you should never put all your eggs in one basket. She could also consider allocating a portion of cash to intermediate-term bonds for stability. Interest rates are likely to decrease further in the future, too.