Can You Retire With $1 Million? (The Truth About Your Nest Egg)

Yes—but how long it lasts depends entirely on how you live, where you live, and when you stop working.

For some, $1 million can cover 30 years or more. For others, it runs dry in half that time. The key isn’t the number—it’s how you spend, invest, and plan around it.

Is $1 Million Actually Enough?

That seemingly impressive $1 million retirement nest egg might not stretch as far as you think. When you break down the annual income it generates, many retirees are surprised by the limitations.

For some Americans, especially those in lower-cost areas with paid-off homes and modest lifestyles, $1 million can provide a comfortable retirement. For others living in expensive coastal cities or those with significant healthcare needs, it might cover just the basics.

The true adequacy of $1 million depends on several personal factors: your age when you retire, how long you expect to live, where you live, your health status, and the lifestyle you want. One size doesn't fit all when planning for retirement.

What Does A Million Dollar Retirement Look Like?

Here's what you need to understand about how a million dollars translates to actual retirement living and what factors influence how comfortably you can live:

Realistic expectations for a $1 million nest egg

The 4% rule means withdrawing 4% of your total retirement savings in your first year of retirement and then adjusting that amount for inflation in later years.

Using this rule as a guideline, $1 million generates about $40,000 of annual income before taxes. This amount must cover all your living expenses, including housing, healthcare, food, and leisure activities.

Many retirees are surprised to discover that their million-dollar portfolio may provide a more modest lifestyle than they expected, especially if they haven't taken into account taxes on withdrawals from traditional retirement accounts.

Your investment choices significantly impact your income potential. Conservative portfolios protect against market drops but generate less income, while more aggressive investments offer growth potential but come with greater risk.

Real life example of a couple discovering the reality of retirement income

Michelle and Eric, a couple in their 50s, represent many Americans who have postponed serious retirement planning until midlife. Their story illustrates not just the financial calculations but the emotional weight of realizing what their retirement reality might look like.

Their experience highlights the importance of having realistic expectations about what your retirement savings will provide. Michelle and Eric's realization that their projected savings would generate around $36,000 annually served as a valuable wake-up call. This awareness prompted them to reevaluate their retirement strategy, consider additional income sources, and adjust their savings approach while they still had time to influence their financial future.

Factors that impact your retirement finances

Several key factors will determine how far your retirement savings can take you. Let's look at each one in detail:

Age of retirement

Your retirement age dramatically affects how far $1 million stretches. For example, retiring at 55 versus 67 could mean supporting yourself for an additional 12 years on the same amount of money. Early retirement requires more careful planning and typically a larger nest egg to ensure your money lasts throughout your more extended retirement period.

Location and cost of living differences

A million dollars in Mississippi might last nearly 25 years, while in Hawaii, it could be gone in under 12 years based on average living expenses in each state.

Housing costs vary dramatically by location. Many retirees boost their retirement income by moving from high-cost areas to more affordable regions.

Beyond housing, everyday expenses such as groceries, utilities, and transportation can be 30-50% higher in expensive cities compared to rural areas.

Healthcare costs and insurance needs

According to Fidelity's estimates, the average 65-year-old couple retiring today needs to save approximately $315,000 just for healthcare expenses.

Medicare doesn't cover everything. Many retirees face out-of-pocket costs for dental, vision, hearing, and long-term care, which can quickly deplete their retirement savings.

Long-term care represents a significant financial risk. In many states, the average annual cost of a private room in a nursing home exceeds $100,000, potentially rapidly depleting your $1 million if needed.

Expected lifestyle and spending habits

Your personal spending habits significantly impact how far $1 million goes. Retirees live vastly different lifestyles based on their priorities, values, and financial situations. Consider these hypothetical examples:

• The Minimalist Retiree: Joan lives simply in a paid-off home in a small town in the Midwest. She spends about $32,000 annually, enjoying local activities, gardening, and occasional visits to her grandchildren. Her $1 million will likely last 30 years or more, especially with Social Security supplements.
• The Middle-Ground Retiree: David and Maria spend $50,000 yearly in a medium-cost city. They travel domestically twice a year, maintain one car, and enjoy regular restaurant meals and cultural events. Their $1 million, combined with Social Security, should last about 20 to 25 years.
• The Luxury Retiree: Thomas and Patricia spend over $90,000 annually, maintaining homes in two locations, traveling internationally three times a year, and belonging to a country club. Their $1 million would be depleted in about 12 years without additional income sources.

Some retirees find that expenses naturally decrease by 20-30% as they eliminate commuting costs and work-related expenses. Others find that their expenses increase when they have more time and are actively pursuing new hobbies.

For more information and guidance on how to prepare for retirement, read my other guides:

• How To Retire Early (4 Strategies To Retire Years Ahead of Schedule)
• My Simple Retirement Guide (real life story inside)

Inflation and market performance

Even a modest 3% annual inflation cuts purchasing power in half over 24 years. Your retirement plan must account for rising costs over several decades.

Market performance during the first 5 to 10 years of retirement has a dramatic impact on long-term success. A significant downturn early in retirement forces withdrawals from depleted accounts, making recovery difficult.

This sequence of returns risk requires careful planning. Many financial experts recommend keeping 1 to 2 years of expenses in cash equivalents to avoid selling investments during market downturns.

How long $1 million typically last in retirement

Based on national averages and the 4% withdrawal rule, $1 million is expected to last approximately 16 to 22 years for a typical retirement, assuming moderate inflation and average market returns.

The geographical location creates huge variations. Research shows that $1 million lasts nearly twice as long in states like Mississippi, Oklahoma, and Arkansas compared to California, Hawaii, and New York.

Your personal withdrawal rate determines how long your money lasts. At 3%, $1 million has a high probability of lasting 30 years or more, while at 5%, the risk of running out of money within 20 years increases significantly.

Calculating Your Retirement Number

To figure out if $1 million will meet your retirement needs, you need to understand several key calculations and approaches:

The 4% rule and withdrawal strategies

The classic 4% rule suggests withdrawing 4% of your portfolio in the first year of retirement and then adjusting that amount for inflation in subsequent years. For $1 million, that's $40,000 initial annual income.

Modified approaches, like the "guardrails method," adjust withdrawals based on market performance, taking less during downturns and more during booms, to extend the duration of your money.

The rule assumes a 30-year retirement period and a moderate investment mix. If you retire earlier or expect to live longer, you may need to use a more conservative withdrawal rate of 3% to 3.5%.

Account for inflation in retirement

Historical inflation averages around 3% annually, though recent years have seen higher rates. Your retirement income needs to grow accordingly just to maintain purchasing power.

Many retirees underestimate inflation's impact. Even at 3%, costs double approximately every 24 years, meaning that a $40,000 income would need to grow to $80,000 to buy the same goods and services.

Social Security provides inflation protection through cost-of-living adjustments, but these often lag behind actual cost increases for items that retirees purchase most, such as healthcare.

Estimate your retirement expenses

Creating an accurate picture of your future expenses is critical for retirement planning. Follow these steps to build a realistic budget:

• Track current expenses: Monitor all spending for 3-6 months to establish your baseline. Include everything from groceries to subscriptions to occasional splurges.
• Separate needs from wants: Categorize expenses as either essential (housing, food, healthcare, utilities) or discretionary (travel, dining out, hobbies). This helps prioritize during tight financial periods.
• Adjust for retirement changes: Some costs will decrease (such as commuting, work clothes, and retirement contributions), while others may increase (like healthcare, leisure activities, and travel).
• Build in buffers: Include often-forgotten expenses like home repairs, car replacements, and periodic large purchases. These irregular expenses can derail a retirement plan if not properly budgeted.

After completing your expense estimate, revisit it annually to ensure it still aligns with your lifestyle and financial situation. This ongoing evaluation helps you stay on track and make adjustments before small issues become major problems.

Consider your retirement lifestyle goals

Retirement isn't one-dimensional. Many retirees experience a "go-go" phase of active travel and spending, followed by a "slow-go" phase of moderation, and eventually a "no-go" phase with lower activity but potentially higher healthcare costs.

Specific goals require specific funding. If world travel is important to you, you may need an additional dedicated travel fund beyond your basic living expenses.

The retirement lifestyle spectrum ranges widely. Some find fulfillment in living simply on an annual income of $30,000, while others maintain active social lives and memberships that require an annual income of $100,000 or more.

For a bigger picture on exactly how much you need based on the assortment of factors and the national average, you can read my other articles on the subject:

• How Much Do I Need to Retire (simple guide + real life story)
• What is the Average Retirement Savings (with real life examples)

How to Make $1 Million Last Through Retirement

Making your retirement savings go the distance requires smart strategies for both spending and investing your money:

Create a sustainable withdrawal strategy

The traditional 4% rule has been challenged in today's low-yield environment. Some recommend a more flexible approach, starting at 3.5% and adjusting based on market performance.

Consider a "bucket strategy" with dedicated accounts for short-term needs, medium-term goals, and long-term growth to provide both security and growth potential.

Tax-efficient withdrawal sequences can significantly extend the life of your portfolio. Generally, to maximize tax advantages, draw from taxable accounts first, then tax-deferred accounts, and finally, Roth accounts.

Manage investment allocations during retirement

Traditional wisdom suggested decreasing stock exposure in retirement, but longer lifespans mean many retirees need continued growth. Modern portfolios often maintain 40-60% in equities, even during retirement.

Regular rebalancing prevents portfolio drift and maintains your desired risk level. To properly rebalance, review your portfolio at least annually or whenever asset classes drift more than 5% from your target allocation.

The process involves selling portions of investments that have grown beyond their target percentage and buying more of those that have fallen below their targets. This disciplined approach helps you systematically "buy low and sell high" while keeping your risk exposure consistent with your retirement goals.

Reduce major expenses in retirement

Controlling your largest expenses is crucial for making your retirement savings last longer. Even small percentage reductions in major spending categories can add years to your financial runway. Focusing on these big-ticket items provides much more benefit than trying to save a few dollars on coffee or other small pleasures.

Housing typically represents 30-40% of retirement expenses. Downsizing, relocating to a lower-cost area, or using a reverse mortgage can significantly reduce this burden.

Eliminating debt before retirement dramatically increases financial flexibility. Prioritize paying off high-interest debt and consider accelerating mortgage payments to enter retirement debt-free.

Transportation costs often rank second in household budgets. For example, it might be possible for a two-car household to transition to a single vehicle, saving thousands of dollars annually on insurance, maintenance, and depreciation.

Protect against healthcare costs

Healthcare expenses are one of the most underestimated aspects of retirement planning. Many people focus solely on building their nest egg while overlooking the potentially devastating impact medical costs can have on even well-funded retirement accounts.

Medicare enrollment at 65 is crucial, but gaps in coverage require supplemental insurance. Budget $6,000-$8,000 annually per person for premiums, copays, and out-of-pocket expenses.

Long-term care insurance or hybrid life and LTC policies can protect against catastrophic care costs. To balance cost and protection, consider policies that cover 3-5 years of care rather than lifetime coverage.

Health Savings Accounts (HSAs) offer triple tax advantages and can be reserved explicitly for retirement healthcare expenses if you can pay current medical costs out of pocket.

You can try out my Retirement Calculator to help you figure out exactly how much you need to retire based on when you want to quit, an estimate of life expectancy, and how much money you need each year to live comfortably.

Additional Income Sources To Supplement Your Million

Your retirement portfolio doesn't have to be your only source of income during your golden years:

Social Security benefits and when to claim them

For many retirees, Social Security accounts for 30% to 40% of their retirement income. The average monthly benefit is approximately $1,800, but higher earners can receive up to $3,627 monthly at full retirement age.

Delaying benefits increases monthly payments by approximately 8% per year between full retirement age and 70, potentially boosting lifetime benefits for those with longer life expectancies.

Strategic claiming for married couples can maximize household benefits. In many cases, the higher earner should delay claiming as long as possible, while the lower earner claims earlier.

Part-time work during retirement

Working part-time during retirement isn't for everyone, and it's completely understandable if continuing to work isn't part of your retirement vision. Many people spend decades looking forward to freedom from workplace obligations. However, even modest employment can dramatically extend the life of your retirement savings while potentially providing social connection and purpose.

Even a modest part-time income of $1,000 per month can reduce portfolio withdrawals by $12,000 annually, significantly extending the life of your retirement savings.

The "bridge job" approach involves working part-time during early retirement to delay Social Security claims and reduce early withdrawals from investments during crucial growth years.

Some retirees find that limited work in fields they enjoy makes retirement more fulfilling, as it provides structure, social interaction, and intellectual stimulation, along with a source of income.

Passive income streams for retirees

Creating income sources that require minimal ongoing effort can significantly supplement your retirement portfolio. These income streams work for you, providing regular cash flow without demanding your full attention:

• Real estate investments: Rental properties can provide reliable income streams and inflation protection. A paid-off rental home generating $1,500 monthly ($18,000 annually) can reduce portfolio withdrawals by nearly half for someone following the 4% rule on a $1 million nest egg. Just be sure to consider property management options if you don't want to take on the responsibilities of being a landlord.
• Dividend investing: Dividend-focused investment portfolios can generate an annual income of 3-4% while maintaining growth potential. A $300,000 allocation to high-quality dividend stocks yielding 3.5% provides about $10,500 per year in relatively reliable income that typically increases over time.
• Income annuities: These annuities offer a guaranteed income, regardless of market performance. Allocating $200,000 to a qualified longevity annuity contract (QLAC) might provide $15,000+ annually starting at age 80, ensuring you don't outlive your money during your most vulnerable years.

Generally, having a mix of these passive income streams is the best strategy.

How to Reach $1 Million for Retirement

Building a million-dollar nest egg is achievable with consistent effort and smart planning strategies:

Investment strategies to build your nest egg

Building wealth requires a methodical approach to investing over time. The strategies you choose should align with your risk tolerance, time horizon, and financial goals.

Low-maintenance index investing

Consistent contributions to low-cost index funds matter more than trying to time the market. Automatically investing $500 monthly with a 7% average return grows to $1 million in about 35 years. This approach requires minimal knowledge and maintenance while historically delivering strong long-term results.

Target-date retirement funds

These all-in-one investment solutions automatically adjust their asset allocation as you approach retirement. They start more aggressive when you're younger and gradually become more conservative as your retirement date approaches. This "set it and forget it" approach works well for investors who prefer simplicity and professional management.

Tax-optimized account strategy

Tax-advantaged accounts, such as 401(k) plans and IRAs, accelerate growth through tax deferral or tax-free compounding. Prioritize these accounts before investing in taxable accounts. Strategic placement of investments across different account types— tax-deferred, tax-free, and taxable —can significantly increase your after-tax returns without changing your investment selections.

I break down tons of other investment tips and the mindset you should have in my YouTube Video, If I Wanted to Become a Millionaire in 2025, I’d Do This:

If I Wanted to Become a Millionaire in 2025, I’d Do This

Catch-up contributions for late starters

Starting early makes a huge difference in retirement savings, thanks to the power of compound growth. Someone who begins investing in their 20s can achieve the same results with much smaller monthly contributions than someone who starts in their 40s or 50s. The best time to start was 20 years ago, but the second-best time is today.

At age 50+, the IRS allows catch-up contributions of $7,500 to 401(k) plans and $1,000 to IRAs annually. Maximizing these opportunities can add $100,000 or more to retirement savings over 15 years.

Late starters may need to consider higher savings rates. While challenging, saving 20-25% of income can build substantial retirement funds even with a late start.

The impact of compound interest over time

Starting early creates exponential benefits. $5,000 invested annually from ages 25-35, then left to grow (total contribution: $50,000), typically outperforms $5,000 invested annually from ages 35-65 (total contribution: $150,000).

The rule of 72 demonstrates compound interest growth. Dividing 72 by your expected return percentage shows how quickly your money doubles. At 7% returns, investments double approximately every 10 years.

Market downturns benefit long-term savers through dollar-cost averaging. Regular contributions during market lows allow you to purchase more shares that appreciate during recoveries.

Aggressive saving and investments are the main component of the FIRE movement, or Financial Independence, Retire Early” movement. You can read more about it in my guide, My Financial Independence, Retire Early (FIRE) Guide.

Beyond $1 Million: When You Need More

While a million dollars is a common retirement goal, some situations call for a larger financial cushion:

Signs that $1 million might not be enough

While a million dollars remains a significant amount of money, certain circumstances may indicate you need a larger retirement fund. Watch for these warning signs that your retirement target should be higher:

• You live in an expensive location: High-cost living areas like San Francisco, New York, or Boston may require more than $1 million to maintain a modest lifestyle due to housing costs that exceed twice the national average.
• You plan to retire early: Early retirement significantly increases the amount needed. Retiring at 55 instead of 65 requires funding potentially 40+ years of retirement rather than 30.
• You have family financial responsibilities: Supporting adult children or aging parents creates additional financial demands. Nearly 25% of today's retirees provide some financial support to family members, requiring larger nest eggs.

If any of these situations apply to you, you may need to consider a higher retirement goal. The traditional million-dollar benchmark may not provide the security you seek in these circumstances.

Example of anxiety over retirement security despite substantial savings

Rob and Adrienne, a couple in their early 60s with a nearly $2 million net worth, highlight a common paradox: substantial savings don't automatically create retirement confidence. Despite being financially successful by most standards, they've been living with money anxiety for years, constantly questioning if they'll have enough to last.

Their story highlights the importance of having a concrete plan rather than just a target number. Despite accumulating wealth that many would consider more than sufficient, Rob and Adrienne experienced anxiety because they lacked certainty about their financial future.

Without professional guidance to translate their savings into a sustainable spending plan, they couldn't confidently answer the most critical question: "Will our money last?" This underscores why planning to create a personalized retirement strategy is so valuable, particularly when you have specific lifestyle goals or concerns about longevity.

Additional savings strategies for a comfortable retirement

Maximize tax-advantaged savings beyond employer matches. Some retirees fund 401(k)s to the annual maximum, then contribute to IRAs, HSAs, and taxable accounts.

Consider working longer in a reduced capacity. Phased retirement approaches allow continued income and benefits while transitioning gradually out of the workforce.

Develop multiple income streams beyond traditional retirement accounts. Small businesses, rental properties, royalties, and other passive income sources can substantially reduce pressure on investment portfolios.