How Long Will $1 Million Last in Retirement?

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Senior woman with money
Sean Locke Photography /

Editor's Note: This story originally appeared on Personal Capital.

A lot of people wonder exactly how much money they’re going to need in order to enjoy a comfortable retirement. One common benchmark for retirement savings is $1 million.

“Surely, if I’ve saved up a million bucks, I’ll be able to retire comfortably,” is how this thinking traditionally goes.

But is this really the case? Is a million dollars enough money to ensure a financially secure retirement today?

One study determined that a $1 million retirement nest egg will last about 19 years on average. Based on this, if you retire at age 65 and live until you turn 84, $1 million will be enough retirement savings for you.

How long $1 million will last in retirement depends on a large number of personal finance factors, including the key ones listed next.

1. Your desired retirement lifestyle

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Do you have a picture in your mind of what retirement will look like for you?

For example, do you plan to travel extensively, dine at the best restaurants, spend time with children and grandchildren (and spoil the grandkids), tour the country in a motorhome, buy a yacht or sailboat, or join a country club?

If so, you may need considerably more than $1 million to support this kind of lifestyle.

On the other hand, if you envision a simpler and more frugal retirement lifestyle, or you are one of the lucky few who has a robust retirement pension, $1 million might be plenty of money for you to retire on and still leave a generous inheritance for your heirs.

2. Your risk tolerance and rate of return

Worried senior man
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When entering retirement, many people adjust their asset allocation to a less risky mix of stocks, bonds and cash equivalents. While boosting safety and reducing volatility, this generally comes with an expectation of lower rates of return throughout retirement.

Finding the right balance between risk and return could potentially stretch a $1 million retirement nest egg significantly further if that money was invested more aggressively throughout retirement. But this could also subject your retirement funds to higher risk of loss, which might jeopardize your retirement financial security.

Managing the risk-reward tradeoff is something that each individual and couple must seriously consider. It might be smart to discuss this with a financial adviser.

3. Your health and life expectancy

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Health care expenses can eat up a big chunk of your retirement nest egg, depending on the type of health care insurance coverage you have and what health issues you encounter during your retirement.

In fact, according to a recent estimate, the average couple retiring this year will spend $300,000 after taxes on health care expenses in retirement.

While Medicare will partially cover many health care expenses, there will still be copays and other out-of-pocket medical expenses you’re responsible for. If you are in poor health or experience major medical complications after you retire, this could drain your $1 million nest egg faster than you may have planned.

Further, if your family has a history of longevity, you might live longer than average.

If you end up outliving the average lifespan, you might need more than $1 million to last throughout retirement. According to the Centers for Disease Control and Prevention (CDC), the average life expectancy in the U.S. is 78.7 years. This breaks out to 76.2 years for men and 81.2 years for women.

4. Where you live in retirement

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One study determined how long a $1 million nest egg will last on average in each state.

One million dollars will last the longest — just over 23 years — in Mississippi, while it will last the shortest — just over 10 years — in Hawaii, according to the study.

More important than state tax rates is the overall cost of living in any given state. Some retirees choose to relocate in retirement to reduce their overall cost of living.

5. How much income you receive in retirement

Worried seniors reviewing bills

Your retirement savings probably won’t be your only source of income in retirement. You will probably receive Social Security income and you also might choose to work part-time in retirement in order to generate additional income.

Every dollar of additional income you receive in retirement will help your retirement nest egg last longer and improve your chances of retiring on $1 million.

6. The impact of inflation

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Inflation erodes the purchasing power of your retirement savings because it costs more money to buy the things you need — everything from food and groceries to gasoline, clothing, and entertainment.

After years of low inflation, the U.S. economy has recently experienced an inflation spike. If this continues for a long period of time, it could dramatically jeopardize your ability to retire on $1 million as inflation eats away at what that nest egg will purchase.

How to get to $1 million in savings

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Asking whether or not you can retire with $1 million presumes that you will be able to save $1 million in the first place.

Following are some steps to help you reach this retirement savings plateau.

1. Aim to save between 10% and 15% of your annual pre-tax income for retirement

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This assumes an approximately 40- to 45-year working career during which you are actively saving money for your retirement, such as between ages 25 and 67.

If you participate in an employer-sponsored retirement plan at work — such as a 401k or 403(b) plan — and your employer matches your contributions, this could reduce the amount you need to save.

Employer matches represent a guaranteed, risk-free return on your money so it usually makes sense to contribute at least enough to an employer-sponsored retirement plan to qualify for a full match.

2. Leave your retirement savings alone

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One of the biggest hindrances to accumulating $1 million in retirement savings is withdrawing money from your retirement account before you retire.

Not only might you incur early withdrawal penalties, but you will miss out on the potential long-term compounding of returns on your savings. Compounding is the biggest friend you have when it comes to accumulating a large retirement nest egg.

3. Invest most of your savings in potential high-yield vehicles

Older couple thinking about their long-term investments
ESB Professional /

When saving for a long-term goal like retirement, it’s usually smart to put most of your money in investments that offer the greatest potential return. Historically speaking, equities (or stocks) outperform other investment categories over the long term.

Over the last century, for example, the stock market as measured by the S&P 500 Index has returned about 10% per year. As noted above, you might want to adjust your asset allocation to a less-risky mix of stock, bonds, and cash equivalents as you near and enter retirement.

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