Date: September 18, 2023

Dreaming of Retirement? Here’s What $3 Million Can Get You

Let’s say you’ve tucked away $3 million for your retirement years in Hartford or New Haven, Connecticut. It might sound like a large amount, but in today’s world of economic uncertainty, inflation, and rising longevity, it’s important to know the real purchasing power of your savings. 

In this blog, we’ll explore how viable it is to retire with $3 million in savings and how you can effectively manage these assets with comprehensive retirement planning. Let’s dive in.

1. Retirement Spending Levels

As the old saying goes, “Failing to plan is planning to fail.” 

One of the first things to consider is how much you plan to spend during early, mid, and late retirement years. For many, $3 million may sound like a lot. But between travel, hobbies, philanthropy, and the day-to-day expenses of living in New Haven or Hartford, Connecticut, you need proper planning in your early retirement years to ensure you have adequate resources in your later retirement years. 

As you prepare for retirement, you should have an open, honest conversation with your spouse and a Connecticut Accredited Investment Fiduciary (AIF®) about what you envision for your retirement years.  From there, you should create a retirement budget with realistic estimates of your living expenses after you retire. The key word here is “realistic”.  Retirement is not the time to “shoot from the hip” with loose, unrealistic estimates. 

Retirement is different enough to require new thinking about assets, income, and expenses. After all, retirement for one or both spouses may last 30 or more years. A lot can happen in those latter decades of life.

Starting with a reasonably accurate projection of your annual expenses means fewer surprises. However, the unexpected is one of the surprises you should plan. You need to be ready, whether it is a catastrophic medical event, a recession, or some other event that is difficult to predict. When you have a good handle on your expenses, you can retire with the confidence that your accumulated assets will support you and your spouse for the rest of your lives.

Let’s not forget the impact of rising longevity. With advancements in medical science, many of us are living longer. This could be a blessing or a curse based on your physical and financial well-being. A comprehensive retirement plan factors in potential medical expenses late in life, ensuring you are prepared for medical events that are difficult to predict.

Based on the cost of living, a general rule of thumb suggests drawing down 3-4% of your retirement savings annually. This means a $3 million portfolio could provide $90,000 to $120,000 per year of income before calculating the impact of Social Security.  This is an important stream of income that reduces your need to withdraw as much from your retirement assets.


Read our latest Quick Guide, “High Net Worth Retirement Strategies in Woodbridge, CT.”


2. Retirement Income Sources

While your savings will form the foundation of your retirement income, looking at other potential income streams you can count on to cover your living expenses is essential. Other potential income sources could be Social Security, real estate investments, annuities, part-time work, inheritance, and other sources.

Each income source should be considered as part of your overall financial strategy. A fiduciary financial advisor in Connecticut can help you navigate the complexities of when to take social security or how to optimize other income sources on an after-tax basis.

 For example, one of the major retirement income-related decisions is when is the right time to start taking Social Security benefits. It can be as early as age 62 and as late as age 70. Making an informed choice on this matter is pivotal as it has long-lasting implications on your retirement income stream. Here are five factors to consider when analyzing your options:

  • Full Retirement Age (FRA): Your FRA is determined by your birth year. Starting benefits before reaching your FRA results in a reduction in monthly benefits. Conversely, delaying benefits past the FRA increases benefits up to age 70. This is important because it can significantly impact your lifetime benefit.
  • Life Expectancy and Health: None of us have a crystal ball considering our health and longevity, but family history can provide some insight. If you expect a longer lifespan, it may be worth delaying benefits to receive a larger monthly amount. Taking benefits earlier might make sense if health concerns are serious enough to shorten your life expectancy.
  • Current Financial Needs: Examine your current financial situation. Do you need the Social Security benefits to cover immediate expenses? If you’re still working or have other income streams, consider waiting to avoid potential reductions due to earnings limits.
  • Taxes and Other Income: Up to 85% of your Social Security benefits may be taxable depending on your other income. Working with a financial advisor to understand how other income streams will impact your benefits can help you develop a strategy that minimizes taxes. 
  • Spousal and Survivor Benefits: If you’re married, divorced, or widowed, there are additional considerations. Your claiming decision can impact your spouse’s or a former spouse’s benefits. Understanding the spousal and survivor benefits can ensure you make the right choices for both parties.

3. The Ongoing Impact of Inflation

Inflation is often the cause of the silent erosion of your wealth. For example, even an average of 3% annually can significantly diminish the purchasing power of your assets over a longer period. That means the $100,000 income you’re drawing now will not buy as many goods and services in just ten years. 

This may not sound like much, but certain services like healthcare are rising faster than inflation. An AIF ® advisor specializing in high-net-worth retirement planning strategies should incorporate inflation assumptions and healthcare costs into your plan. 

4. Defensive Retirement Investing Strategies in Uncertain Markets

As a high-net-worth individual, you must be vigilant about the factors driving the U.S. economy. Developing defensive planning and investment strategies for uncertain markets is also good. 

For example, diversifying your investments into multiple asset classes and economic sectors can reduce your risk of large losses during unstable times. A seasoned fee-only financial advisor in New Haven, CT, can help you benefit from these strategies, thereby aligning your goals and tolerance for risk.

5. The Crucial Element of Knowledge: An AIF® Designation

A trusted financial partner should be at the heart of your retirement strategies. The Accredited Investment Fiduciary (AIF®) certification signifies expertise in financial planning with a focus on fiduciary responsibility. This dual credential ensures your best interests are always the top priority. 

While $3 million might sound like the dream retirement fund, ensuring it lasts requires careful planning, expert advice, and disciplined implementation. 

Get to Know Heritage Capital

You’ve dedicated years to accumulating assets for retirement. You will spend even more years protecting what you have accumulated during retirement. As you enter your golden retirement years, your savings must return the favor by working for you.

At Heritage Capital, our reputation as an acclaimed personal investment management firm speaks volumes. Our mission? To ensure you flourish financially throughout your retirement. There’s little room for retirement mistakes. After all, it may be too late to return to work – even part-time. Effective retirement and estate planning has become paramount.

With over thirty years of serving Connecticut residents, Heritage Capital has been at the forefront of helping individuals gracefully steer through later retirement years and the unique events that occur post-retirement. Our founder, Paul Schatz, is at the helm of our retirement planning and financial management. Paul is a frequent guest on business media platforms like CNBC, Fox Business News, and Yahoo Finance.

If you’re looking for an experienced financial professional to guide you through your retirement, connect with us.

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Paul Schatz, President, Heritage Capital