For many Americans, $1 million is the benchmark for a secure retirement. But in today’s economy, at what age you can retire with $1 million dollars will depend on a range of factors. These include lifestyle and expenses, your investment strategy and your withdrawal rate. You might find that it’s only enough for a more modest retirement, depending on when and how you retire.
A financial advisor can help you model different retirement scenarios, evaluate risks and create a plan that focuses on making your nest egg last as long as you do.
At What Age You Can Retire With $1 Million
To figure out at what age you can retire with $1 million dollars, we first need to understand how long that amount is likely to last. Most people start with the 4% rule. This means you could reasonably expect to spend 4% of your savings annually, adjusted for inflation, without running out over a 30-year retirement. Under this rule, $1 million would provide $40,000 per year in retirement income. If you prefer a more conservative approach, consider a 3.5% withdrawal rate, which gives you $35,000 per year, or a 3% withdrawal rate instead.
Now, let’s compare those annual figures to what the average retiree spends. According to data from the Bureau of Labor Statistics, the average American age 65 and older spends about $55,000 per year. Based on that estimate, $1 million would likely fall short in less than 30 years without additional income or investment growth. To cover this gap, you’d need to supplement your nest egg with Social Security, a pension, or other income sources.
The age at which you retire will determine how long your savings can last and how much you’ll need to withdraw each year. Retiring earlier stretches your money across more years, while delaying retirement can increase Social Security benefits and shorten the time you rely on savings. Here are three examples of a nest egg with $1 million at ages 55, 67 and 70:
Your target retirement age isn’t determined by your savings alone. Several other factors will affect how long your $1 million lasts and how comfortable your retirement will be. Here are four general ones to consider. Health is one of the biggest factors affecting how long retirement savings last. If you retire before age 65, you’ll need private health insurance, which can cost thousands of dollars each year until you qualify for Medicare. These extra costs can quickly eat into your savings if you haven’t planned for them. Even with Medicare, retirees still face expenses like premiums, copays, prescriptions and possible supplemental insurance. Long-term care costs can also be high and aren’t fully covered by Medicare. Staying healthy can help stretch your money further, while unexpected health problems may require spending more from your savings to cover care. Where and how you live plays a major role in how long $1 million will last in retirement. Choosing a lower-cost location, downsizing to a smaller home or reducing housing expenses can stretch your budget significantly. At the same time, ongoing costs like healthcare, travel, hobbies, home maintenance and taxes need to be considered when estimating annual expenses. Balancing these factors can determine whether $1 million will meet your retirement needs depending on when you retire and the lifestyle you plan to maintain. In addition to Social security benefits, other sources of income can help you cover expenses and reduce how much you need to take from savings each year. Pensions, rental income, annuities, dividends and part-time work can provide steady cash flow and support your retirement budget while preserving more of your savings. Your asset allocation plays a big role in how long your retirement savings will last. A mix of growth and stable investments can help you take withdrawals while still giving your money a chance to grow. Stocks, bonds and cash each serve different purposes, and the right balance depends on your goals and comfort with risk. Too much risk in retirement can be dangerous. Big market losses early on, called sequence of returns risk, can drain your savings faster because you’re withdrawing from a shrinking portfolio. On the other hand, being too cautious with investments might mean your money doesn’t keep up with rising costs over time. To preserve your $1 million nest egg over the span of your retirement, a diversified portfolio can help you spread your money across stocks, bonds and cash, thereby reducing the risk of large losses from any single investment. This strategy could position your savings to grow at a pace that keeps up with inflation and even earn steady income. So, at what age can you retire with $1 million dollars? The answer depends on your lifestyle, expenses, health and whether you’ll have other sources of income. For some, $1 million might allow for retirement as early as age 60, especially with modest spending and the help of Social Security. For others with higher costs or limited supplemental income, working until 67 or later may provide greater financial security. Photo credit: ©iStock.com/RomoloTavani, ©iStock.com/SewcreamStudio, ©iStock.com/PeopleImages Read the full article hereExamples of Retirement With $1 Million
Other Factors Affecting at What Age You Can Retire With $1 Million
Health and Healthcare Costs
Personal Expenses and Cost of Living
Other Sources of Income
Investment Strategy
Bottom Line
Retirement Planning Tips
Subscribe to our newsletter to get the latest updates directly to your inbox
Related Articles
