What If I Have $1 Million and Still Can’t Afford to Retire?

Editor's Note: This story originally appeared on NewRetirement.

If you think that with a million dollars in the bank you would be on easy street when it comes to retirement, think again.

According to research from Natixis Investment Managers, more than 35% of millionaires say it will take a miracle to retire securely.

In fact, millionaires are almost as likely to think that retirement is out of reach than investors overall. We hear it from NewRetirement users all the time. “I have a million dollars, but I am worried that my money won’t last.” is a common refrain.

And, while it may seem far-fetched and you may want to roll your eyes, it is a very real problem.

It turns out, the economic woes of millionaires are very similar to those experienced by more average savers. Only the scale is different.

It’s Not That Millionaires Can’t Retire, but That They Can’t Maintain Their Quality of Life

Many of the roughly 7 million millionaires in North America earn and spend more than the average household. And, their savings (as a percentage of their income and spending) is roughly on par with everyone else.

Which means, that they, like most other people, simply aren’t saving enough to maintain their quality of life for the 20-30 years they’ll live in retirement.

Almost anyone can retire at a reasonable age, the question is how much do you need or want to spend.

The Problem? Millionaires Save at Roughly Same Share of Their Income as Less Wealthy Households

(And, that is not enough.)

In the survey, high net worth individuals report median retirement savings of $625,000, which, while good, comes out to just 2.5 times the $250,000 median retirement savings of the overall survey population.

Similarly, while an average retirement savings rate of 19.4% is impressive, it is still just under three percent higher than the overall average of 16.6%.

As a result, it appears that while the numbers look good, the difference is not great enough to merit any substantial difference in sentiment about their retirement prospects.

Everyone, millionaires and people who are not millionaires, need to save at a rate that is adequate for future withdrawals.

Plus, a Million Just Isn’t What It Used to Be, Especially in This Economy

The problems are not just that millionaires spend more than average savers, it is also that big economic problems can have a more appreciable impact when you have a lot of money.

One million dollars today is literally not what it used to be. Inflation has recently taken a big bite out of what money can buy.

And, losses in the stock market become five- or six-figure problems if you have a lot of money invested.

So, What to Do if You Are a Millionaire (or Anyone) and Are Facing Retirement Worries?

Believe it or not, millionaires really are a lot like everyone else. And, the solutions to their retirement savings problems aren’t so different either.

Work a Little Longer

Even though millionaires plan on retiring at the relatively early age of 63, the majority (58%) believe that they may have to work longer.

Your retirement date is a powerful lever to help you achieve a secure retirement. But, your time is a big tradeoff for the extra money you’ll get from working longer.

Use the NewRetirement Planner to assess your retirement date and look for ways to retire earlier.

Create a Budget and Consider How to Reduce Retirement Spending

Reducing your future spending can dramatically improve your financial security in retirement. And, it doesn’t always need to be at the cost of what is important to you.

If you create a detailed budget for retirement, you can get a better sense of where you might want to economize. Creating detailed spending projections can help you prioritize.

You might not be able to afford everything, but you can probably spend on what really matters to you.

Strongly Consider Your Home Equity as a Retirement Asset

For many people, millionaires included, their home is their most valuable asset.

Depending on your estate planning aspirations, prudently using your home equity to help fund retirement can be a good strategy.

You can downsize domestically or abroad, secure a reverse mortgage, look at communal living situations, and consider home equity loans to bridge to Social Security or through downturns in the stock market.

These strategies can improve your cash flow, give you an infusion of savings to spend in retirement and have other benefits.

However, remember that retaining your home equity is a good back up plan in case you encounter a major unexpected financial need, a medical event, or require long term care in the future.

Turn Savings Into Lifetime Income

If you are worried about running out of money in retirement, you may want to consider how to turn your savings into lifetime income.

There is no one size fits all approach to retirement income, but here are 18 different retirement income strategies that you can mix and match to your advantage.

Work With an Adviser (but Don’t Give All Your Money to Them)

You have worked hard to save. A million dollars is still a great achievement and used effectively, it can likely enable a rewarding retirement.

Getting help with your investments and guidance on your plan (especially with regards to retirement income, insurance options, and taxes) is a great idea.

However, be wary of paying someone to manage your assets especially if they are charging you based on Assets Under Management (AUM). If they are managing $1 million at a 1.5% AUM fee, that is $15,000 a year that could otherwise be used by you.

You may want to consider working with a fee-only adviser instead. A fee-only adviser charges a fixed fee in exchange for advice.

The cost of fee-only advice is typically a fraction of AUM and there is typically no conflict of interest between what is in the adviser’s best interest and yours as can sometimes be the case with AUM.

Will You Ever Have Enough?

There is a lot that can and will go wrong in the future, and that can make planning your retirement seem futile and frustrating no matter how much money you have saved.

It is important to anticipate potential risks to your finances: inflation, stock market downturns, living a long life, long term care, and more. However, plan for efficient ways to deal with these stressors instead of letting it keep you from your goal.