If you have $2 million in retirement savings, congratulations. That’s well above the $1.26 million Americans think they need to retire comfortably, according to Northwestern Mutual. (1)
At this point, you may have overcome the challenge of saving enough money. Now, your next task is wealth preservation. Higher taxes and poor lifestyle choices can quickly erode a seemingly vast treasure trove.
Changing your perspective from creating wealth to protecting it is not easy. But if you can avoid these five common money traps high-net-worth individuals sometimes fall into, the journey might not be so dangerous.
If you follow the 4% rule, $2 million in retirement savings will give you $80,000 per year (adjusted for inflation). That might be too much or too little, depending on where you live and how much you spend.
Lifestyle inflation – where your spending habits change as your portfolio and salary size change – is a real risk. This may be one reason why only 32% of American millionaires consider themselves “rich,” according to Northwestern Mutual. (2)
Of these millionaires, 70% who did not work with a financial advisor said they knew how much money they needed to retire comfortably. In other words, many high net worth individuals do not take 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 sounds like a lot, it can disappear quickly and may not be enough to meet everyone’s needs.
If the majority of your wealth is held in tax-advantaged retirement accounts, such as 401(k) plans and IRAs, you need to be prepared for the tax consequences of withdrawals in retirement.
Less than half (49%) of millionaires without a financial advisor told Northwestern Mutual they consider how much taxes will eat into their retirement savings. Without proper forecasting of these taxes and a strategic plan to minimize them, your retirement safety net will end up being weaker than expected.
Work with an expert to see if you can minimize these costs through strategies like Roth conversions or tax-gain harvesting.
With $2 million in retirement savings, you’re better able to take on risk than the average investor. But that doesn’t necessarily mean you should.
The best approach is usually somewhere between aggressive growth and conservative fixed income. Finding the balance that works for you depends on your age, risk appetite, and target returns.
Most millionaires seem to understand this. According to investment firm Kohlberg Kravis Roberts, people with $1 million to $30 million in liquid assets typically have 2% of their portfolio in cash, 22% in alternatives, 33% in fixed income, 15% in international stocks and 28% in domestic stocks. (3)
Investing across different asset classes and countries can stabilize your multimillion-dollar portfolio so that an economic crisis in one country or a correction in any particular market doesn’t completely derail your retirement plans.
Read more: This is the portfolio shift many wealthy investors are quietly making in 2026. Should you consider this too?
As a millionaire, you may be tempted by seemingly exotic asset classes usually reserved for the ultra-rich. Private equity funds, litigation finance, music royalties, private credit funds, and hedge funds may approach you for some investment.
Despite their eye-catching marketing materials, research by quant investor and money manager Richard Ennis shows that these so-called alternative assets are anything but.
Ennis said that over the past 16 years, alternatives have on average underperformed simple passive index funds composed of stocks and bonds, mainly because of their higher fees.
In short, you don’t need a fancy investing strategy. A time-tested, simple and cheap index fund or bond fund will suffice.
If your portfolio exceeds $2 million, you may have more wealth than you can spend in retirement. In other words, you can leave money for your children and loved ones.
It is wise to legally document as soon as possible how you want your assets to be distributed after your death.
A surprising number of wealthy people do not have a will or formal estate plan. When Northwestern Mutual asked its high-net-worth respondents if they had a will, 29% said they did not.
By saving $2 million or more, you can enjoy a comfortable retirement. But a few tax or spending mistakes could quickly change that. Avoid these five common pitfalls and your golden years will go more smoothly.
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Northwestern Mutual Bank (1), (2); Intelligent Assets (3).
This article provides information only and should not be considered advice. It is provided without any warranty of any kind.
