Suze Orman Is Usually Spot On, but I Think She’s Off About $2M Not Being Enough to Retire With. Here’s Why

Suze Orman gives some pretty top-notch advice, especially for those who are winding down for retirement. While I think you could do quite well for yourself by listening to her advice, I do think she tends to be far more conservative (at least in my humble opinion) when it comes to things like withdrawal rates and the overall size of one’s nest egg.

Undoubtedly, there’s nothing wrong with shooting to save anywhere from $5-10 million before retiring, a ballpark estimate Orman suggests shooting for. However, I think it’s quite a stretch to say that $2 million is a “chump change” even if inflation is due for a second wave.

Sure, a more-padded nest egg will pave the way for a far more comfortable, even lavish, retirement lifestyle. Also, given inflation’s lingering stench in recent quarters, it’s vital to adjust retirement figures to the upside to ready for higher prices. Indeed, another five years could see prices rise at an above-average pace, especially with recent U.S. CPI numbers creeping higher again. But don’t be so quick to put your retirement plans on ice if you’re nowhere close to hitting $5-10 million.

The $2 million nest egg isn’t what it used to be. But is it really not enough for retirement?

Undoubtedly, “erring on the side of caution,” as I believe Orman seems to do with her advice, and waiting until you have an eight-figure nest egg rather than a low seven-figure sum will put to rest your fears of running out of money in retirement. Even the toxic mix of a weak economic environment, falling stock market, and high inflation (think a stagflationary climate) may not be able to take away your “golden ticket” to retirement, which is the $5-10 million nest egg.

But does that mean it’s not possible to retire on $2 million?

It’s not hard to imagine that many Orman listeners are high-net-worth individuals who aren’t content with a “lean” form of retirement. For these folks with sizeable monthly bills, I do think something closer to $5 million could be a minimum bar to pass before retiring.

That said, I’d argue that $2 million may be more than enough for the many Americans who don’t care to spend like crazy in retirement. Based on the 4% rule, which many advisors go by, a $2 million nest egg would allow one to draw down $80,000 (before taxes) — comfortably above the average U.S. income. Add Social Security into the equation and $2 million will seem like more than enough for many Americans.

It all depends on lifestyle.

Also, not everyone has hefty expenditures and liabilities to cover. For instance, someone who owns their own home in suburban Wyoming with a short bucket list and no desire to travel abroad constantly may have no need for an eight-figure nest egg to live comfortably.

As always, though, your mileage is going to vary, perhaps greatly, making a financial advisor or professional retirement planner a valuable asset as you seek to set the bar for your retirement nest egg.

Though $2 million may no longer work for many Americans’ view of a “dream” retirement (think the all-inclusive Cancun resort and scenic Alaskan cruise), I do think that it’s hard to set sights on the right retirement figure unless you’ve crunched the numbers and have a specific lifestyle in mind. A $2 million sum can work if you make the right changes (think asset allocation and lifestyle), at leat in my humble opinion.

If your “dream” retirement is just having enough to spoil the grandkids occasionally while simply spending more time with loved ones, you may not need as much as you think.

The bottom line

Let’s not kid ourselves. A $1-2 million nest egg is still substantial. You’d be in the millionaire class and can retire depending on your living situation.

At the end of the day, not everyone has an income that would allow them to achieve a nest egg worth at least $5 million. These folks can still retire, though, especially if they’re not heavy spenders. With the right financial game plan and the ability to stay flexible in response to sudden market moves, I think Orman is wrong to discount the power of a $2 million nest egg.