If you have $2 million in retirement savings, congratulations. That’s well above the $1.26 million that Americans believe they need to retire comfortably, according to a 2025 Northwestern Mutual study (1).
At this point, you’ve probably overcome the challenge of saving enough. Now, your next mission is wealth preservation. High taxes and bad lifestyle choices can quickly destroy what looks like a huge treasure.
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It is not easy to change our perspective from wealth creation to wealth protection. But the journey can be less risky if you avoid these five common money traps that high-net-worth individuals sometimes fall into.
1. Not knowing your real lifestyle budget
If you follow the 4% rule, $2 million in retirement savings will give you $80,000 a year, adjusted for inflation. Depending on where you live and how much you spend, this could be either too much or too little.
Lifestyle inflation – where your spending habits change with the size of your portfolio and salary – is a real risk. That’s probably one reason why, according to Northwestern Mutual, only 36% of American millionaires consider themselves “rich.”
Among these millionaires, those who do not work with a financial advisor feel less prepared for retirement and expect to retire two years later than those who do. In other words, some high net worth individuals have not taken the time to properly plan their retirement budget and timeline.
Although $2 million seems like a lot, it can disappear quickly and may not be enough for everyone.
Read more: Almost 50 with no retirement savings? This is why you don’t need to panic
2. Tax time bomb in IRA or 401(k)
If most of your assets are in tax-advantaged retirement accounts such as 401(k) plans and IRAs, you need to be prepared for the tax consequences of making withdrawals in retirement.
In 2024, less than half (49%) of millionaires without a financial advisor told Northwestern Mutual that they consider how much taxes could eat up their retirement savings (2). Without proper forecasting of these taxes and a strategic plan to minimize taxes, you may end up with a smaller safety net than expected in retirement.
Work with an expert to see if you can adopt strategies like Roth conversions or tax advantaged harvesting to reduce these costs.
In these cases, working with a financial advisor can help minimize costly mistakes.
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3. Wrong asset allocation
With $2 million in retirement savings, you have more risk appetite than the average investor. But that doesn’t mean you should do it.
The best approach is usually somewhere between aggressive growth and conservative fixed income. Finding the right balance for you will depend on your age, risk appetite and target returns.
Most millionaires seem to understand this. According to investment firm Kohlberg Kravis Roberts, people with liquid assets between $1 million and $30 million typically have 2% of their portfolio in cash, 22% alternative assets, 33% fixed income, 15% international stocks, and 28% domestic stocks (3).
Investing in different asset classes and countries stabilizes your multimillion-dollar portfolio so that an economic crisis in one country or a decline in a specific market doesn’t completely derail your retirement plans.
Gold has served as a store of value for thousands of years. It is not tied to any one country, currency or economy and cannot be printed like fiat money.
Investors are often attracted to it during periods of economic stress or geopolitical uncertainty – pushing prices higher. Gold prices have more than doubled over the past five years, hitting multiple record highs and outperforming the S&P 500 over the same period.
One way to invest in gold that also offers significant tax benefits is to open a Gold IRA with the help of priority gold.
Gold IRAs allow investors to hold physical gold or gold-related assets within a retirement account, combining the tax advantages of an IRA with the protective benefits of an IRA. investing in goldThat makes it an attractive option for people who want to potentially protect their retirement funds against economic uncertainty.
To learn more, you can get a free information guide that includes details on how to do this Get up to $10,000 in free silver On eligible purchases.
4. Foreign assets
As a multi-millionaire, you may be tempted by exotic asset classes that seem to be reserved exclusively for the ultra-wealthy. Private equity funds, litigation finance, music royalties, private credit funds and hedge funds may reach out to you asking for some investment.
Research from retirement investment advisor Richard Ennis shows that despite their attractive marketing material, these types of alternative assets just aren’t that great.
According to Ennis, from 2008 to 2024, the average alternative asset underperformed a simple passive index fund made up of stocks and bonds, primarily due to their higher fees (4).
Simply put, you don’t need fancy investing strategies.
However, if you’re looking for a solid alternative investment, it’s worth taking a second look at real estate.
Rental properties have long been a proven source of stable, passive income for high net worth investors – so it’s no surprise that real estate accounts for around 25% of the typical family office portfolio (5).
However, the time, effort and cost involved in managing and maintaining multiple properties deters many people from investing. So unless you’re a hedge fund titan or an oil baron, you’ve probably been locked out of one of the most profitable corners of the market.
This is where Mogul can come in. This real estate investment platform offers Fractional ownership in blue-chip rental propertiesWhich gives investors monthly rental income, real-time appreciation and tax benefits – without the need for huge upfront payments or 3am tenant calls.
Founded by former Goldman Sachs real estate investors, the Mogul team handpicks the top 1% of single-family rental homes nationwide for you. Simply put, you can invest in institutional quality offerings for a fraction of the typical cost.
Each asset goes through a screening process, which requires a minimum of 12% returns even in negative scenarios. Across the board, the platform has an average annual IRR of 18.8%. Meanwhile, their cash-on-cash yields average between 10 and 12% annually. Offers often sell out in less than three hoursInvestments typically range between $15,000 and $40,000 per property.
Getting started is a quick and easy process. You can sign up for an account and then Browse available properties. Once you verify your information with their team, you can invest like a mogul in just a few clicks.
Another approach is to look at different parts of the real estate sector.
Accredited investors can now avail this opportunity through platforms like Lightstone DirectWhich provides accredited investors access to single-asset multifamily and industrial deals.
Lightstone Direct’s direct-to-investor model Ensures a high level of alignment between individual investors and a vertically-integrated, institutional owner-operator – a sophisticated and streamlined option for individual investors looking to diversify into private-market real estate.
With Lightstone Direct, Accredited Individual Can access similar multifamily and industrial properties Lightstone operates with its own capital, with minimum investments starting at $100,000.
5. Legacy Blind Spot
If your portfolio is more than $2 million, your assets may exceed what you can consume in retirement. In other words, you can leave money to your children and loved ones.
It would be wise to legally document how you want your assets to be distributed upon passing – and to take this step as soon as possible.
A surprisingly large number of wealthy people do not have a will or formal estate plan. When Northwestern Mutual asked its high net worth respondents in 2024 if they had a will, 29% said they did not have one.
Perhaps this is the reason why 70% of wealthy families lose their wealth by the second generation and 90% by the third generation (6). But by taking steps to preserve your property – and teaching your heirs to do the same – you can help keep your nest egg safe for future generations.
With $2 million or more in savings, you’re in a strong position for a comfortable retirement — but a few tax or spending mistakes could quickly change that. Avoid these five common traps and your golden years will be much smoother.
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Northwestern Mutual (1),(2); SmartAsset(3); Bloomberg (4); Knight Frank (5); pwm (6)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.