Personal Finance

Is It Possible to Retire By 45 If You've Saved $3 Million?

Christy Bieber

Published: March 15, 2025 1:00 pm

Three million dollars is a lot of money. Is it enough to retire by 45? In order to be able to answer that question there are a few key factors that you have to consider.

Here’s what you need to look at to decide if your $3 million nest egg is enough to see you through for the rest of your life. 

What’s your planned annual spending?

If you ask yourself only one question when trying to figure out if $3 million is enough to retire, that question needs to be: What do I plan to spend?  That’s because frugal people would most likely be more than fine with $3 million but those who have expensive needs may not be. 

You have some control over your spending. If you live in a high-cost-of-living area, have two kids you want to put in private school and send through to graduate school, and you want to own a $2 million home, you aren’t going to be able to retire at 45 with $3 million. If you are single with no kids in a cheap part of the country and you just want to hang out gardening all day, you should be fine. 

When you think about your spending, consider your needs over the rest of your life.  If you’re that single kidless person now what happens if you find a partner and have a few babies?  If you’re healthy now and can get by with the cheapest high-deductible health insurance coverage on offer, what happens as you get older and need more comprehensive insurance?

A financial advisor can help you to think these issues through and determine, realistically, how much you’re going to spend each year. Then, you can see if $3 million can produce the income needed to support you. 

What assets do you own? 

The next big question is what your $3 million is tied up in. If you have a $3 million house and nothing in the market, you can’t retire unless you’re going to cash in your equity.

If your money is all in 401(k) and IRA accounts, you’re also going to have a problem since you can’t access the funds yet.

You need to make sure that you have enough money in assets that can produce the required income for you now and in the future. 

What withdrawal rate will you use?

Third, you’ll have to figure out what withdrawal rate to use. The withdrawal rate is the rate at which you take money from your investment accounts. You definitely can’t just start taking funds out with no plan or you risk draining your entire account dry so you end up broke. 

Experts now recommend a 3.7% withdrawal rate to be safe and have the best chance of your money lasting. That’s based on a 30-year retirement and yours will probably be longer, so being even more cautious could be in order. An advisor can help you to decide what rate makes good sense for you. 

Assuming you do opt for the 3.7% withdrawal rate, with $3 million invested, you’d have $111,000 each year in income. That’s more than most people earn and could be plenty in some parts of the country, especially if you have simple tastes. However, it’s not necessarily enough for everyone and if you’re used to earning a pretty good living then suddenly having to be on a budget could be an unwelcome change. 

To avoid being left with regrets, compare this income you think you’ll produce to your spending needs. If you don’t have enough to cover everything plus have a cushion, you should probably keep working. 

Do you understand the long-term impact on your  Social Security? 

Finally, be sure you understand that retiring early isn’t just going to affect your savings account. Social Security bases benefits on average wages over 35 years and retiring at 45 means you’re very unlikely to have a solid 35-year earning history unless you started earning a lot of money at age 10.  Significantly reducing these benefits can be a big downside since they are a source of guaranteed lifetime income. 

Ultimately, the answers to these questions should help you decide if you really have enough to retire at 45 with your $3 million or if you should stick it out. The good news is, if you need to keep working, you have a great start towards investing, and the $3 million you have already put away should grow quickly and help you achieve the financial independence you’re hoping for.