Personal Finance

I Want To Retire In 7 Years And Have $4M Socked Away, How Much Cash Is The Right Number?

Christy Bieber

Published: March 4, 2025 1:16 pm

Last Updated: March 4, 2025 1:21 pm

Figuring out how much money you must have saved before you retire can be more difficult than you’d think. That’s because, while there are rules of thumb you can follow, your own individual needs will determine what size nest egg you actually need in order to  support yourself throughout the entirety of your later years.

You’ll also have to consider not just the total amount you have invested but how you allocate those assets. So, if you have $4 million saved already for retirement, you’ll need to decide both if that’s enough to fund your lifestyle and how much of that money you should keep in cash. 

Here’s what you need to know to make that decision. 

How much money do you need to have invested to retire?

The first big question to ask yourself when deciding whether to retire is how much money your nest egg must produce. This will determine if you have enough saved.

While $4 million is a lot of money, and more than most people have, it’s also not necessarily going to be enough depending on your spending needs. You’ll want to confirm that you are following a safe withdrawal rate so you don’t drain your accounts and end up broke — especially if you are going to retire at a young age. 

If you follow a safe 3.7% withdrawal rate, a $4 million nest egg would give you $148,000 per year to spend. That’s a lot, but if you live in a high-cost-of-living area, are used to spending much more than that, or face big expenses for things like healthcare costs because you retire before you are old enough to be eligible for Medicare, then it may not be enough.

Of course, if you aren’t retiring for seven years yet, your $4 million will grow. Even if you don’t invest another dime, your $4 million will turn into around $6.85 million in seven years assuming you earn an average 8% annual return. That would give you around $253K a year to live on at a safe withdrawal rate — which may be a more comfortable annual income, although you’ll still need to make sure that it works with your planned spending needs. 

Before you decide to call it quits, think carefully about the kind of retirement you want, including your desired annual budget, to confirm that you really can live comfortably on the income you’re able to safely withdraw. 

How much do you need to have in cash?

Once you have decided that you have enough money invested, you’ll also want to determine how much to have in liquid cash. You shouldn’t have all of your money in the stock market because if you do and a market crash happens, you’ll still need to make withdrawals to fund your lifestyle. That would mean that you could end up locking in losses by selling at a bad time. 

Typically, a good rule of thumb is to keep around two years of living expenses in cash, or in very safe and liquid assets like using a CD ladder that regularly has maturing CDs to provide you with income. This way, if a market downturn happens, you’ll have money to live on and can wait for recovery.

Ultimately, though, this is just a general guideline and your best bet would be to talk with a financial advisor to create a personalized asset allocation plan. Your advisor can help you confirm you have the funds to retire and can work with you to ensure your money is in the right mix of assets to give you the security you deserve.