I’m on track to have a $6M nest egg by 55 — even if I stopped saving for retirement today. Can I stop my contributions today?

Picture this hypothetical but relatable scenario: Janice, who is 41 years old, has spent years diligently saving and investing, and by 55, her portfolio is expected to be worth a whopping $6 million. That’s enough to last her four decades if she follows the classic 4% rule and withdraws $240,000 a year.

Janice’s portfolio is balanced, with a mix of stocks and bonds, yielding roughly 6% annually. She’s also healthy, debt-free and has an emergency fund tucked away.

She’s picturing a retirement where she can travel a few times a year, maintain her current lifestyle and indulge in hobbies she’s always put off. There's plans for long weekends in wine country, a small vacation home and occasional splurges on dining and entertainment. She’d also like to leave something for her family.

At this stage, Janice is wondering whether she still needs to continue contributing money to her retirement plan, given her current nest-egg projections, or if she can shift her focus to enjoying her earnings in the present.

The $6 million question

Janice is in an enviable position, but experts caution she should weigh the risks before halting contributions.

A $6 million nest egg is impressive, but markets fluctuate, inflation continues to rise and unexpected expenses, such as health care or major home repairs, can happen any time and chip away at savings.

Assuming she withdraws $240,000 a year, Janice could cover the lifestyle she’s imagining, including vacations, dining and hobbies and still have a buffer for taxes, insurance premiums and the occasional big-ticket expense.

But what if her health care costs rise faster than expected, or a major economic downturn hits? Even small shocks could reduce the longevity of her portfolio. Janice could come across any number of scenarios that would impact her nest egg.

Imagine the market drops 20% right after Janice retires. If she keeps withdrawing the same amount, her nest egg will shrink faster — and by year 20, she may have no choice but to cut back or dip into other savings.

Another risk is inflation spiking above projections and impacting Janice’s spending power. Suddenly $240,000 would buy less, and she’ll have to carefully budget to maintain her lifestyle.

These possible scenarios show that even for someone as well-prepared as Janice, it’s important to continue planning and building a safety net or contingency plan given the economy's volatility.

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Are financial rules of thumb foolproof?

It’s understandable that Janice feels confident. Her current savings projections exceed most of the thresholds set by the experts, including Fidelity’s rule that retirees generally need about three times their annual salary saved by age 40 to maintain comfort in retirement (1). However, there is a danger in assuming that acing one-size-fits-all tests guarantees financial ease.

It’s easy to see the flaws in relying too heavily on the 4% withdrawal rule. While it can be a decent starting point, it’s far too rigid to base a full retirement plan on. The rule assumes the past will repeat itself and doesn’t factor in real-world details like taxes, fees or how your investments are actually balanced.

Experts often suggest adjusting rather than stopping contributions. That could mean cutting down the amount invested or shifting investments toward more conservative options to protect the portfolio from risk.

And then there’s the question of what Janice would do with the money she frees up from investing? She could spend it on lifestyle upgrades or set it aside for large one-time purchases, such as a new home or car, but each choice will have implications for her long-term financial picture.

A balanced approach

For Janice to maintain a steady, risk-aware path while enjoying some flexibility it would benefit her to:

Maintain contributions: Even a reduced savings rate keeps her portfolio growing and provides a cushion against market volatility.

Reallocate and diversify investments: Moving to more conservative options as retirement gets closer can help protect Janice against large losses while dividend-paying stocks or bonds can give her a steady income stream.

Consult a financial advisor: She should seek out professional guidance to make sure her strategy aligns with retirement goals, tax planning and risk tolerance.

Plan withdrawals: Janice should be strategic about her annual spending priorities, such as travel, home improvements and hobbies, and leave a buffer for unexpected costs.

For Janice, it only makes sense to stop investing after some careful planning. By keeping up even small contributions, she can build a safety net for the unexpected and make sure her retirement funds go the distance — with a little left over to leave the legacy she desires.

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Fidelity (1)