Is $1 million enough to retire?

When it comes to retirement savings, there’s no one-size-fits-all answer. Retirement planning is an important part of your overall personal finance strategy, and factors like lifestyle, healthcare, and location will all influence how much you’ll need in your golden years.

For example, retiring in a major city like San Francisco may cost more than retiring in a small town in the Midwest, while other considerations, like anticipated healthcare expenses, can also greatly impact your overall expenses.

That’s why it’s important to take time to calculate your personal retirement budget, including projected monthly expenses, healthcare, travel, and emergency savings. Calculating how much you need can be complex, so if you need further advice, a retirement financial advisor can help you create a personalized retirement budget and plan to maximize your savings.

Let’s say you’re planning to retire with $1 million. The lifespan of $1 million will depend heavily on how much you spend, how the investments within your retirement accounts perform, and how long you live. 

A helpful rule of thumb is the 4% rule, which works on the basis that if you withdraw 4% per year of your total retirement savings, your money could last around 30 years. This means that, in theory, $1 million could support $40,000 per year in withdrawals for 30 years. However, this rule is based on historical averages and doesn’t guarantee results in today’s market, so it's best used as a starting point, not a guarantee. Let’s look at some other key factors you could consider:

Annual expenses: How much do you think you’ll spend per year, taking into account your current or intended lifestyle? Spending $40,000 per year vs. $80,000 will make a huge difference to how long your nest egg will last.

Investment returns and inflation: Market performance and inflation can erode or extend your savings — strong returns can help grow your nest egg, while inflation can erode its purchasing power over time.

Healthcare costs: These expenses, including insurance premiums, out-of-pocket expenses, and medical bills, often increase with age.

Longevity: Of course, this one is impossible to predict, but it will also have a major impact on the lifespan of your retirement savings. For example, if you retire early and live into your 90s, you’d need to plan for a much longer retirement horizon than someone who retires at 65 and lives to 75.

So, is $1 million enough to retire? It depends. Some people might be able to retire comfortably with $1 million, especially if they live in a low-cost area, have a modest lifestyle, own their own home, and supplement their income with Social Security or a pension.

On the other hand, if you’re living in a state with a high cost of living, have significant health care needs, and/or have high annual expenses, $1 million may not be enough to retire.

These factors, along with your personal mix of savings, investments, and income sources, will play a critical role in determining whether this is enough money. To help you plan with more confidence, consider using a retirement calculator to estimate your future expenses and see how long your savings might last if you retire with $1 million.

Planning for retirement is about more than just the money you have saved, although of course this is a significant factor. Managing your assets wisely is crucial to ensuring they last throughout your retirement years. Some overlooked factors include:

Physical and mental health can directly affect your quality of life in retirement, so access to quality healthcare and long-term care options is a key consideration for many. Assuming traditional Medicare coverage, the average person retiring in 2025 may need over $172,500 solely for medical expenses over the course of their retirement,¹ so chronic and long-term conditions will likely create even greater needs for daily support or lifestyle adjustments. 

Read more about health care costs in retirement.

Your real estate choices, including where and how you live, also matter. Many retirees consider downsizing or moving to a home with accessibility features to reduce maintenance and costs. Additionally, whether you’ve paid off a mortgage or are renting will affect your monthly expenses, flexibility, and equity in retirement.

Over time, inflation can erode the value of your money: even a 2-3% annual inflation rate can significantly reduce purchasing power over a 20–30 year retirement period. For example, at 2.5% yearly inflation, $50,000 today would need to grow to about $91,000 in 25 years just to maintain the same purchasing power. So building inflation-adjusted growth into your retirement plan is crucial. 

Many retirees don’t realize that certain retirement income sources are taxable in many states, including traditional IRA and 401(k) withdrawals, Social Security benefits (depending on total income) and investment gains. However, in some states, such as New Hampshire and Nevada, retirees can enjoy avoid state income tax on retirement income, so deciding where to retire is also an important factor in retirement planning.

Planning for retirement is a long-term process that typically benefits from well thought-out strategies. Here are some ideas:

• Start early to maximize compounding: Thanks to compound interest, the earlier someone can start saving, the more time the money has to potentially grow. Even small, consistent contributions starting from your twenties or thirties can sometimes lead to bigger savings than larger contributions made later in life.

• Diversify your savings: Some retirees consider a mix of accounts to give them flexibility and help manage taxes during retirement. This might include tax-advantaged retirement accounts, high-yield savings accounts, certificates of deposit (CDs), or taxable investment accounts. Smart investing can help grow your nest egg faster, but it’s important to research and fully understand the risks involved before making any financial decisions.  

• Adjust your spending expectations: Experts often suggest taking a realistic and flexible approach to retirement spending. Consider how your expenses might change over time — for example, you may want to do more travel or hobbies earlier in retirement, while medical costs could arise later.

• Revisit your plan regularly: Your goals, income, expenses, and the economy will all change over time, so it might be helpful to review your retirement plan annually, adjust contributions as needed, and account for changes in tax laws and Social Security policies.

While $1 million is often seen as a benchmark for retirement savings, the reality is that it’s different for everyone. Is $1 million enough to retire? For retirees with low expenses, no debt, and access to Social Security and pensions, it may be. But for others, especially in high-cost areas or with significant healthcare needs, it might not. Ultimately, the size of your retirement nest egg will depend on your lifestyle, location, health, and financial goals. 

Whether you’re just starting your retirement savings journey or you’re looking to grow an existing nest egg, Raisin can help you maximize your money. With high-yield savings accounts and competitive CDs available from trusted banks and credit unions, Raisin makes it easy to find the right place to grow your savings. Start saving smarter today and take a step closer to your retirement goals.

The short answer is, it depends. The amount needed to retire comfortably varies widely, depending on your individual circumstances. For many Americans, a rule of thumb suggested by financial experts is to have around 10 to 12 times your annual salary saved by the time you retire at age 67.² For example, if you earn $75,000 per year, you’d need around $750,000 to $900,000 in savings. However, factors like where you live, your health, and your lifestyle may push that number higher or lower.

The $1 million figure is a general guideline for retirement saving. Whether you need that amount depends on if you have other sources of income like Social Security or pensions. Additionally, living in areas with a lower cost of living and maintaining a modest lifestyle, combined with good health, will stretch your savings further. However, retiring on less than $1 million may mean you’ll need to budget carefully and be prepared for unexpected expenses.

In retirement, healthcare expenses tend to increase the most, as medical costs (like doctor visits, prescription medications, and long-term care) rise with age. This is partly why financial longevity could be a concern for women, who may need care longer than men, according to data from the Administration for Community Living.³ Other fees that may increase include travel or hobbies, if you become more active, as well as inflation, which can affect everyday costs like groceries and utilities over time.

Social Security provides a crucial source of income for most retirees, often replacing about 40% of pre-retirement earnings for average earners.⁴ While Social Security alone might not cover all living expenses, it may help reduce the amount you need to withdraw from your savings each month. The age at which you start claiming Social Security also affects your monthly benefit — so delaying benefits until age 70, for example, could increase your payout. 

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.

Sources

¹https://finance.yahoo.com/news/planning-retire-may-facing-172-121500479.html

²https://www.cnbc.com/select/savings-by-age/

³https://acl.gov/ltc/basic-needs/how-much-care-will-you-need

⁴https://www.nasdaq.com/articles/heres-how-much-social-security-benefit-income-retirees-can-expect-based-on-earnings