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$5 Million Isn't What it Used to Be

Last month, a Rolex watch owned by the last emperor of Vietnam sold for $5 million at an auction in Geneva. (1) That’s also the cost of a 30-second Super Bowl advertisement. (2) Five million dollars just isn’t quite what it used to be anymore, is it?

It sure sounds like a lot, though. You would think that a nest egg like that could buy you a luxury retirement, complete with a European vacation home, private jet and a pair of Jaguars. But is that realistic anymore? And if not, why?

What seemed like an immense amount of money back when we were young won’t go nearly as far today as we once thought. The loss of buying power can really cramp your retirement style. Five million dollars has gone from promising a life of luxury to being just enough. These are the biggest factors contributing to the erosion of your nest egg’s value:

Medical Spending

A couple retiring in 2016 at age 65 are estimated to spend a total of $260,000 to cover health care costs in retirement. That estimate assumes traditional Medicare coverage and includes premiums, co-payments, deductibles, and out-of-pocket drug costs. (3) Many people will spend a lot more than that. 

If you retire early, you will have to provide your own health care until you become eligible for Medicare at age 65. Many people fail to take this into consideration, and this “gap coverage” can carry a hefty price tag. Also, the longer you live, the higher your health care expenses will probably be.

Long-Term Care

Hand-in-hand with overall medical spending is long-term care. Medicare does not cover home health aides, assisted living, or nursing homes. (4) Almost 70% of people turning 65 will need long-term care at some point in their lives. Your chances of needing care go up the older you get and if you are female since women live an average of 5 years longer than men. (5)

Long-term care is expensive and can quickly decimate a nest egg. In Pennsylvania, the 2016 average annual cost for homemaker services was just shy of $50,000. An assisted living facility cost almost the same. 

A private room in a nursing home was more than double that, costing $116,800. Here in Lancaster, the average nursing home was more expensive, costing just under $130,000 a year. Nursing home costs are rising about 4% a year, so 10 years from now that same room in Lancaster will cost $174,000. In 20 years, when you are more likely to need it, it will cost you $233,000. (6)

As you can see, a $5 million nest egg doesn’t go nearly as far with today’s increased longevity and long-term care costs.


What you do in retirement will have a tremendous impact on how far your money will go as well. Do you plan to stay in your home or downsize? Have you paid off that home, or will you? Do you need to support elderly parents or adult children? The amount of traveling and leisure activities you partake in will also affect how you calculate your retirement costs. 

Many people also turn to philanthropy in retirement. If you want to live a generous lifestyle, you need to know what you have to work with. If you just go with the flow, without being intentional, even a $5 million account can drain quickly. 


When it comes to retirement savings, everyone talks about rates of return, fees, and asset allocation. There’s something else that will quietly erode your savings before you even realize it. Inflation. 

It is easy to overlook inflation because it is slow and gradual. However, even at a 3% rate, your purchasing power will be nearly cut in half after 20 years. (7) When $5 million becomes $2.5 million it’s not nearly as impressive, is it?


No matter how much you may wish it, when you retire from your job you don’t get to retire from paying taxes as well. If you fail to add taxes into your retirement calculations, or if they rise more than you expect, they can make a big dent in your savings. 

Anticipating taxation, and investing in and withdrawing from the right kinds of retirement accounts can get tricky. In fact, knowing how to combine all of your expected retirement expenses into a spending plan that won’t leave you broke is overwhelming for most people. That’s why I’m here to help. 

As a CERTIFIED FINANCIAL PLANNER™, I have extensive training in not only investments but holistic financial planning that encompasses every area of your life. I can help you take a myriad of possible retirement scenarios into consideration as we craft a personalized plan for you. Whether you have $5 million, or more or less, we can come up with a plan that won’t leave you high and dry at the most vulnerable time of your life. Give me a call at (717) 283-4186 or email me at dniggel@keywealthpartners.com to schedule a “Get Acquainted” meeting where I can get to know you and your hopes and dreams, not just the numbers in your bank account. Together, we can develop a plan to give you peace of mind for your golden years.

About David

David Niggel, CFP®, ChFC®, AIF® is the founder and president of Key Wealth Partners, LLC, an independent wealth management firm serving individuals, families, and business owners. Along with over a decade of financial services experience, he has advanced knowledge and training in providing holistic financial planning with fiduciary and ethical care, holding the CERTIFIED FINANCIAL PLANNER™, Chartered Financial Consultant®, and Accredited Investment Fiduciary® certifications. With hands-on entrepreneurial experience, he has the unique ability to help clients meet both their individual and business goals. Based in Lancaster, he serves clients through the York, Harrisburg, Hershey, and Central, Pennsylvania areas. Learn more by visiting www.keywealthpartners.com or connecting with David on LinkedIn.


(1) https://www.bloomberg.com/news/articles/2017-05-15/vietnamese-emperor-s-rolex-sells-for-record-5-million-in-geneva

(2) https://www.nytimes.com/2017/01/29/business/5-million-for-a-super-bowl-ad-another-million-or-more-to-market-the-ad.html?_r=0

(3) http://money.cnn.com/2016/08/16/retirement/retirement-health-care-costs/

(4) http://money.cnn.com/2016/08/16/retirement/retirement-health-care-costs/

(5) https://longtermcare.acl.gov/the-basics/who-needs-care.html

(6) https://www.genworth.com/about-us/industry-expertise/cost-of-care.html

(7) http://www.cnbc.com/2017/04/28/one-million-bucks-just-isnt-what-it-used-to-be.html