Is $1 Million Enough for a Comfortable Retirement? (2024)

$1 million sounds like a lot of money. And it is. According to a recent Schroders survey, only 21% of workers over 45 think they'll reach that pinnacle. So if you're approaching retirement with a million-dollar nest egg, congratulations.

Even though you're ahead of the curve, you may still worry it isn't enough. If so, you're not alone. Schroders says workers approaching retirement age thought, on average, they'd need at least $1.1 million to live comfortably.

The big issue is inflation. You don't need me to tell you that our money just doesn't go as far as it used to. In real terms, a monthly income of $6,000 two years ago might only buy around $5,000 worth of goods and services today, per BLS data. That can have a serious impact on retirees or those close to retirement age who'd already priced out the next chapter of their lives.

Work out what income you might need

$1 million used to be a common target for retirees. It is actually the goal I set for myself a few years ago without doing any research into what I might actually need. Now I understand that there's no one-size-fits-all retirement, and I need to rethink that plan.

Our costs vary dramatically depending on where we live, how we live, our health, whether we have dependents, and a host of other factors. Rather than picking an arbitrary number, ultimately, it's our living costs that determine the amount we need to set aside. A couple living in St. Louis will have different retirement needs than a single person in New York City, for example.

Think about how much you might need to live comfortably in retirement and work backward from there. That may not be an easy task. I certainly can't predict what my life might look like in 20 years. All the same, there are some ways to make educated guesses. For example:

  • Many financial planners advise that you'll need around 80% of your pre-retirement income. So if you earn $80,000 a year, you might need $64,000 a year when you retire.
  • Another approach is to use your current spending habits to predict your retirement needs. Review your budget and think about what might change -- for example, you might have paid off your mortgage loan, which would eliminate one big cost. But you might also need to factor in higher medical bills.

It's important to think about how you plan to live. My parents traveled a lot in their 60s and 70s, so their costs were higher than couples who stayed home. Other retirees might study, take on a new hobby, or spend more time with family. The more of these things you can build into your budget, the clearer your financial picture will become.

Set your retirement goal

Let's say you think you need $64,000 a year when you retire. Some of that money will come from your investments, but that won't be the only source of income. Think about what you might get from Social Security and whether you'll have any other money coming in. You can use the Social Security benefit calculator to work out how much you can expect.

If you receive $24,000 a year from Social Security, you'll need your investments to generate another $40,000. Here's where another useful rule of thumb comes into play: the 4% rule. This says that if you have a portfolio, you can withdraw 4% every year, adjusted for inflation, without running out of money.

If we work backward from there, you'd need a $1 million portfolio to generate a $40,000 withdrawal in the first year. You could then adjust it upward for inflation each year and be confident the money would last. You might be able to withdraw a higher percentage, but you would run the risk of financial troubles further down the line.

The 4% rule isn't perfect. It doesn't fully factor in all variables, such as asset allocation, market performance, inflation, taxes, and the way people's needs may change during their old age. There's a big difference, for starters, between money in a Roth IRA, which you can withdraw tax-free, and money in a traditional IRA, which will be taxed.

Use a retirement calculator online to see how different variables could impact your retirement plans. You might also want to consult with a financial advisor to map out different scenarios and see how to best manage your investments. The 4% rule is a good starting point, but it's important to adjust it to your situation.

A $1 million portfolio could generate $40,000 a year

If your retirement savings aren't where you want them to be, there are steps you can take. Look at your current budget and see how you can squeeze some extra savings to funnel into your brokerage account. The more you can contribute now, the more time it has to grow.

Bear in mind that there are a lot of gray areas in retirement planning, which gives you more flexibility. For example, some people might want to retire at 65. But if you haven't saved as much as you wanted, you might retire later, or work part time for a few years. If you're over 50, you might use IRS catch up contributions to put more money into your tax-advantaged accounts, such as an IRA.

A $1 million portfolio can go a long way. The 4% rule shows we could expect it to generate the equivalent of around $40,000 a year. Other tools will give us other estimates. Ultimately, only you know how much you'll need to live comfortably, and whether that sum will be enough. Most of all, you might be able to make some compromises to stretch that money a little further.

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Is $1 Million Enough for a Comfortable Retirement? (2024)


Is $1 Million Enough for a Comfortable Retirement? ›

Saving a million dollars is a big achievement, but many Americans fear it won't be enough. One rule of thumb suggests $1 million would generate around $40,000 each year, adjusted upward for inflation. Instead of picking a figure, work out what income you might need in your old age and work backward from there.

Can a person retire comfortably with 1 million dollars? ›

How long will $1 million in retirement savings last? In more than 20 U.S. states, a million-dollar nest egg can cover retirees' living expenses for at least 20 years, a new analysis shows. It's worth noting that most Americans are nowhere near having that much money socked away.

How many Americans have $1000000 in retirement savings? ›

However, not a huge percentage of retirees end up having that much money. In fact, statistically, around 10% of retirees have $1 million or more in savings.

How many millions do you need to retire comfortably? ›

Key Takeaways. Adults in the U.S. believe they will need an average of $1.46 million to retire comfortably, a number trending considerably higher than the current inflation rate, according to findings from Northwestern Mutual's 2024 Planning & Progress Study.

Can you live off the interest of $1 million dollars? ›

Historically, the stock market has an average annual rate of return between 10–12%. So if your $1 million is invested in good growth stock mutual funds, that means you could potentially live off of $100,000 to $120,000 each year without ever touching your one-million-dollar goose. But let's be even more conservative.

How long will 1 million last in retirement with Social Security? ›

A recent analysis determined that a $1 million retirement nest egg may only last about 20 years depending on what state you live in. Based on this, if you retire at age 65 and live until you turn 84, $1 million will probably be enough retirement savings for you.

How long will $1 million last in retirement by state? ›

For retirees in California, the annual cost of living expenses would be $72,319.57, meaning a $1 million retirement fund would last for about 14 years. Retirement can often last 25 years or more, according to Fidelity.

What net worth is considered rich? ›

While having a net worth of about $2.2 million is seen as the benchmark for being rich in America, it's essential to remember that wealth is a subjective concept. Healthy financial habits and personal perspectives on money are crucial in defining and achieving wealth.

How much money do most people retire with? ›

What is the average and median retirement savings? The average retirement savings for all families is $333,940 according to the 2022 Survey of Consumer Finances.

What is a high net worth retiree? ›

A high-net-worth individual (HWNI) is an individual who generally has liquid assets of at least $1 million after accounting for their liabilities. 1 The term HNWI is commonly used within the financial industry to identify individuals who need tailored financial and money management services.

Can I retire at 55 with $1 million? ›

If you hope to retire early with $1 million, it's certainly doable, but you should have a sound understanding of what your expenses and income in retirement will look like. Plan ahead and bring in an expert if needed so you can enjoy your retirement without any significant financial surprises.

Is $1.9 million enough to retire? ›

In one 2023 survey, from the global investment firm Schroders, older workers predicted they would need $1.1 million to retire comfortably. A survey from Northwestern Mutual put the figure at $1.27 million. In a 2024 poll by Charles Schwab, 401(k) participants said they'd need $1.9 million to retire.

How much should I save to retire with 1 million? ›

The amount you need to save to retire with $1 million depends on how old you are when you start saving. If you get a 10% annual return, it ranges from $116 per month for 20-year-olds to $2,623 per month for 50-year-olds. You can save more by using tax-advantaged retirement accounts, such as 401(k)s and IRAs.

How rich are you if you have $1 million dollars? ›

Additionally, statistics show that the top 2% of the United States population has a net worth of about $2.4 million. On the other hand, the top 5% wealthiest Americans have a net worth of just over $1 million. Therefore, about 2% of the population possesses enough wealth to meet the current definition of being rich.

How much annual income can $1 million generate? ›

Saving a million dollars is a big achievement, but many Americans fear it won't be enough. One rule of thumb suggests $1 million would generate around $40,000 each year, adjusted upward for inflation. Instead of picking a figure, work out what income you might need in your old age and work backward from there.

How it feels to retire with less than a million? ›

You can live off a retirement nest egg of less than $1 million, but how comfortable you will be depends on a number of factors. Many retirees simply live off Social Security, so it can certainly be done, but if you're looking to be comfortable, you might have to make some changes in your lifestyle or where you live.

How much monthly income will $1 million generate? ›

At the current Treasury rate of 4.3%, a $1 million portfolio would generate about $43,000 per year, or roughly $3,500 per month. With your Social Security payments that would generate about $6,000, again enough to live comfortably in most places.

What is a good monthly retirement income? ›

Average Monthly Retirement Income

According to data from the BLS, average 2022 incomes after taxes were as follows for older households: 65-74 years: $63,187 per year or $5,266 per month. 75 and older: $47,928 per year or $3,994 per month.

What is the average 401k balance for a 65 year old? ›


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