Income
Although 1 million dollars sounds like a lot of money, with inflation, it doesn’t go as far as it once did. The amount drops even further when you’re trying to stretch it over multiple decades. If you’re hoping to retire with 1 million in savings, it’s important to look at other factors, like your living expenses and how much Social Security you expect to receive each month. Learn more.
Stephanie Faris
Published April 20th, 2022
Stephanie Faris
•
Published April 20th, 2022
Table of Contents
Key Takeaways
If you have $1 million set aside for retirement, it can be enough to last.
Retiring before 59½ can come at a cost, especially if your retirement savings is tied up in a 401(k) or IRA.
Budgeting and investing in an annuity can help you stretch your savings, potentially allowing you to retire early on $1 million.
Although 1 million dollars sounds like a lot of money, with inflation, it doesn’t go as far as it once did. The amount drops even further when you’re trying to stretch it over multiple decades. If you’re hoping to retire with 1 million in savings, it’s important to look at other factors, like your living expenses and how much Social Security you expect to receive each month.
How to Retire on 1 Million Dollars
How many people have $1000000 in savings? Not many. In fact, nearly half of U.S. families have no retirement savings at all. If you’ll have a million dollars waiting for you at retirement, you’re ahead of the game, but you’ll still need to stretch those dollars to make sure they cover the years, and even decades, to come.
Frequently Asked Questions
When you’re wondering what to do with a million dollars, saving for retirement is always an excellent option. But there are also things you can do to maximize your income. It’s important to keep two important things in mind, whether you’re wondering if you can retire on $1 million or can you retire $1.5 million comfortably. The average life expectancy, 77, is just an average. You might live longer. Another thing to consider when looking at how much is enough to retire is when you plan to start taking Social Security. Here are some of the top questions to ask yourself if you’re wondering can I retire with 1 million.
Can You Retire on 1 Million Dollars in 5 Years?
Can you retire on a million dollars? Certainly. But if you’re looking at how much to retire at 55 or younger, the answer might not be as straightforward as you’re hoping. If you’ll be at least 62 in five years, you’ll likely have a Social Security payment coming in, so it’s important to use the SSA’s my Social Security tool to find out how much you can expect each month.
Can You Live Off Monthly Interest on 1 Million Dollars?
This depends on how (or whether) you plan to invest your savings. If the funds are in an interest-earning account or invested in a low-risk asset, it’s possible your 1 million dollar nest egg might be able to provide interest income to cover your retirement - but ultimately this depends on your lifestyle needs and expenses. If you’re able to invest the funds and only live off the interest provided, it’s possible that with time your original million dollar nest egg will have time to grow and provide more interest income later in retirement.
Can A Couple Retire On 1 Million Dollars?
If you’re retiring for two, the better question to ask might be can I retire on 2 million? Your spouse or significant other will have expenses, as well, which means your $1 million will be reduced as you strive to pay household expenses. If you can wait until your 60s and earn interest in the meantime, you could have enough, when added to your Social Security to retire on $1 million.
What Percentage of Retirees have 1 million dollars?
What percentage of retirees have a million dollars? It’s probably not as many as you think. While exact numbers aren’t possible, one survey found that between 7 and 12 percent of Americans have $1 million or more saved. Isolating those aged 59 and younger, the number is 7 to 8 percent.
Why Buy an Annuity?
One way to stretch your million dollars further is to have that money work for you. But savings interest on 1 million dollars is next to nothing, and high-yield investing can be risky. One alternative is to purchase an annuity that can take your $1 million dollars and use the interest to fund some or all of your retirement. You can find annuities that pay between 2 and 4 percent, which can turn that $1 million into more.
Can I retire at 40 with $1 Million?
If you’re lucky enough to see what does 1 million dollars look like by your 30s, it’s only natural to ask if it’s enough to retire early. Granted, you’re better off retiring in your 40s with 4 million dollars, but retiring at that age with only $1 mm in the bank will be a stretch.
Can I retire at 45 with $1 Million?
Retiring at 45 with $1 million leaves you in an only slightly better position to retire than at 40. If you’ve already figured out how to get a million dollars, you might be better trying to push that upward so that you’ll have an even better answer when it’s time to ask how much money to retire at 55.
Can I retire at 50 with $1 Million?
As you get closer to Social Security eligibility, the outlook gets a little more positive. You’re likely to find that $1 million is a more common answer to how much to retire at 50 than it is to 45 or 40. At 4 percent, you could earn enough interest to cushion the blow of any amount you take out. However, it’s important to check into whether your savings account allows withdrawals. Many retirement plans prohibit withdrawals before the age of 59½ without penalties.
Can I retire at 55 with $1 Million?
Is 4 million enough to retire at 55? Sure. Is $1 million? Potentially not. Again, you’ll need to look into any penalties you might pay and see if you can reduce your budget to minimize the impact to your savings balance. But it’s definitely doable, especially if you plan to start taking Social Security when you reach 62.
How to Retire on 1 Million Dollars by Age
Whether you’re asking can you retire on 2 million or 1 million, the answer depends on your age and circumstances. Here’s a breakdown by age to give you a feel for what you’ll get each month, assuming you live to the average age of 77.
| Income per year (without interest) | Interest on yearly income (at 4 percent) | Income per year (with 4 percent interest) | |
|---|---|---|---|
| Age 40 | $27,027 | $1,081 | $28,108 |
| Age 45 | $31,250 | $1,250 | $32,500 |
| Age 50 | $37,037 | $1,481 | $38,518 |
| Age 55 | $45,455 | $1,818 | $47,273 |
| Age 65 | $83,333 | $3,333 | $86,666 |
Things To Consider When Retiring
If you’re saving for retirement, at some point you’ll need to stop and plan what to do with 1 million dollars as your nest egg. You’ll need to set a budget and look at how you’ll reduce your withdrawals and make sure your money covers your full retirement. Here are some other things to consider as you look at is a million dollars enough to retire.
Inflation Considerations
How long will 1 million last in retirement? It depends. You’re probably thinking about things through the lens of current costs. Inflation can be unpredictable, so it’s important to consider how your expenses might change after retirement. But as you’re thinking about how to retire with 1 million, keep in mind that in retirement, you can reduce some of your expenses, including downsizing your home and shifting to a less expensive vehicle.
Final Thoughts
Whether you hope to retire with 10 million, the answer to how and when to retire still depends on your individual circumstances. A Certified Financial Planner (CFP®) can take a look at your retirement savings and help you set a budget that will allow you to clearly see the best retirement age for you.
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Stephanie Faris has written about finance for entrepreneurs and marketing firms since 2013. She spent nearly a year as a writer for a credit card processing service and has written about finance for numerous marketing firms and entrepreneurs. Her work has appeared on Money Under 30, The Motley Fool, MoneyGeek, E-commerce Insiders, and GoBankingRates.
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Stephanie Faris has written about finance for entrepreneurs and marketing firms since 2013. She spent nearly a year as a writer for a credit card processing service and has written about finance for numerous marketing firms and entrepreneurs. Her work has appeared on Money Under 30, The Motley Fool, MoneyGeek, E-commerce Insiders, and GoBankingRates.
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