If you have $2 million in retirement savings, congratulations. That’s well above the $1.26 million that Americans, according to Northwestern Mutual, believe are needed to retire comfortably. (1)
By now, you’ve probably overcome the challenge of saving enough. Now, your next mission is wealth preservation. Higher taxes and poor lifestyle choices can quickly erode what seems like a huge hidden treasure.
Changing your perspective from generating wealth to protecting it is not easy. But the journey could be less perilous by avoiding these five common money traps that high-net-worth people sometimes fall into.
If you follow the 4% rule, $2 million in retirement savings would give you $80,000 a year, adjusted for inflation. That could be too much or too little, depending on where you live and how much you spend.
Lifestyle inflation, where your spending habits change with the size of your portfolio and your salary, is a real risk. Perhaps it’s one reason why only 32% of American millionaires, according to Northwestern Mutual, consider themselves “rich.” (2)
Of these millionaires, 70% who do not work with a financial advisor said they know how much money they need to retire comfortably. In other words, many high net worth people have not taken the time to plan their retirement budget and lifestyle needs.
Don’t fall into the same trap. Consider hiring a financial advisor to help you create a solid budget that you can easily stick to. While $2 million seems like a lot, it can disappear quickly and may not be enough for everyone.
If much of your wealth is in tax-advantaged retirement accounts, such as 401(k) plans and IRAs, you should prepare for the tax consequences of making withdrawals in retirement.
Less than half (49%) of millionaires without a financial advisor told Northwestern Mutual that they consider how much taxes could eat into their retirement savings. Without adequate forecasting of these taxes and a strategic plan to minimize them, you end up with a retirement safety net that is thinner than expected.
Work with an expert to see if you can implement strategies such as Roth conversions or tax profit harvesting to minimize these costs.
With $2 million in retirement savings, you have more ability to take on risk than the average investor. But that doesn’t necessarily mean you should.
The best approach is usually between aggressive growth and conservative fixed income. Finding the right balance for you will depend on your age, your risk appetite, and your target return.
Most millionaires seem to understand this. According to investment firm Kohlberg Kravis Roberts, people with between $1 million and $30 million in liquid assets typically have 2% of their portfolio in cash, 22% in alternative assets, 33% in fixed income, 15% in international stocks and 28% in domestic stocks. (3)
Investing in different asset classes and countries stabilizes your multi-billion-dollar portfolio so that an economic crisis in one country or a correction in any specific market doesn’t completely derail your retirement plans.
Read more: This is the quiet portfolio shift many wealthy investors are making in 2026. Should you consider it too?
As a billionaire, you may be tempted by seemingly exotic asset classes that are typically reserved for the ultra-wealthy. Private equity funds, litigation finance, music royalties, private credit funds and hedge funds could approach you for investment.
Despite their flashy marketing material, research by quantitative investor and money manager Richard Ennis suggests that these so-called alternative assets are not all that.
According to Ennis, over the past 16 years the average alternative asset has underperformed a simple passive index fund made up of stocks and bonds, primarily due to its high fees.
Simply put, you don’t need sophisticated investment strategies. A simple, cheap, time-tested index fund or bond fund should suffice.
If your portfolio exceeds $2 million, your wealth could exceed what you consume in retirement. In other words, you can leave money for your children and loved ones.
It would be wise to legally document how you want your assets to be distributed when you die as soon as possible.
A surprisingly large number of wealthy people do not have a will or a formal estate plan. When Northwestern Mutual asked its high-net-worth respondents if they had a will, 29% said no.
With $2 million or more saved, you’re in a solid position for a comfortable retirement. But some tax or spending mistakes could quickly change that. Avoid these five common pitfalls and your golden years will be much smoother.
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Northwest Mutual (1), (2); Smart asset (3).
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
