$900,000 is a hefty retirement savings, but will it sustain your lifestyle and spending through your golden years? Those who wait as long as possible to collect their Social Security benefits or are lucky enough to have zero debt might find that $900,000 is enough to retire, especially in a smaller city such as Houston or Albuquerque. Learn how far your $900,000 will go and what adjustments you can make to ensure that it lasts you all the years you need it to.

How Earnings and Inflation are Impacting Retirement for Many Americans

In June of 2022, inflation reached a staggering high of 9.1%—this is the highest jump seen since the 1980s. Since then, the rate has dropped, but it is still above the 2% average that indicates price stability. As of January 2024, the rate was at 3.1%, which means that Americans paychecks are not going as far as they used to for common consumer items. In short, it’s more expensive to pay for groceries, gas, and other necessities.

Categories Hit Hardest by Inflation

These are some of the categories hit hardest, with percentages indicating year-over-year price changes:

• Juices and other drinks: 29%
• Beef steaks: 10.7%
• Sugar: 7.2%
• Baby food: 8.7%
• Peanut butter and other fats: 5.1%
• Electricity: 3.8%

Given the overall higher cost of goods, some are finding that they need to cut back on retirement savings. In addition, the New York Times reported in 2023 that there has been an increase in the number of hardship withdrawals taken out of 401(k) accounts. Ultimately, this has delayed retirement for many, with some people saying it’s entirely out of reach.

Even if you haven’t needed to withdraw from your account or pause saving, it’s likely that inflation has had some effect on your retirement saving vehicles—different accounts weather inflation in different ways.

Social Security

While Social Security benefits are evaluated every year to be adjusted against the cost of living, these adjustments have historically been seen as inadequate. The Senior Citizens League reported that seniors lost one-third of their buying power between 2000 and 2021. The League also noted that the cost of goods and services increased by 99.3% between 2000 and 2020, while the Social Security COLA adjustments only rose by 53%.

Note: By waiting until you are older to take your Social Security benefits, the more you will receive each month. When you take the earliest Social Security option, you dramatically reduce your monthly payout for the remainder of your life.

Pensions

Pension plans are typically tied to several of your last years of salary rates. If a period of high inflation hits during the last few years of your working years, it’s possible that your final benefit amount may come in lower as the calculation was made on pre-inflation salary. If high inflation hits after you retire, your payouts will be based on the salary you earned previous to inflation. It’s also important to note that private pensions often do not adjust for inflation at all—only state or local government plans.

401(k) and IRA Accounts

Investments and dividends don’t adjust for inflation, so the money invested in your 401(k) or IRA can be negatively impacted during periods of high inflation. For example: if you’re getting a return of 10% on your 401(k), but inflation hits 8%, you’ll only see a 2% gain on your investment. If you’re getting a return below 8%, your net gain will be negative.

Tip: 401(k) accounts are still good investment vehicles as they see a higher interest rate than many other types of accounts.

Ways to Mitigate Inflation’s Impact on Retirement Savings

• Diversify: You shouldn’t hold only stocks or only bonds—make sure there’s a nice diversification in your portfolio holdings. Be sure to discuss your specific investments with a Certified Financial Planner.
• Adjust your planned spending: It’s always smart to assume there will be some level of inflation, and if you’re worried about a high inflation period hitting while you’re in retirement, adjust your budget accordingly, and make calculations based on a higher inflation rate, such as 5%, rather than a lower one. Example: If you were planning to retire with $50,000 in annual retirement income, a 5% inflation rate would mean you’d need to give yourself a $2,500 raise starting in your second year of retirement.
• Pay off debts: Adjustable-rate mortgages and credit card debt should be paid off before you retire, to prevent the rates from jumping during high inflation periods.
• Hire a Certified Financial Planner: Preparing and saving for retirement is not easy, but it’s a lot easier with a professional who can help you strategize and consider all of your future goals. Talk to a Retirable financial planner to go over your finances and set up milestones to help you reach your retirement goals.

Is $900K Enough to Retire on in 2024?

Just shy of a million dollars, $900,000 is an outstanding savings. Getting to this major milestone takes a lot of hard work, perseverance, and planning. Even so, it’s important to recognize the jump in inflation the US has seen in the past few years—a dollar just doesn’t go as far as it used to. Your $900,000 should be wisely invested, with the help of a Certified Financial Planner, so you will see returns on your savings that will match your financial goals, timeline, and risk tolerance, and hopefully be inflation-proof so you can retire worry-free (or close to it).

Ideally, the rate of return on your investments is enough for you to live off of, so you never need to touch your principal. With $900,000 saved, and factoring in an average annual rate of return between 10–12%, you’ll have between $90,000 and $108,000 to live off of each year, not including your Social Security benefits. If, though, there’s a slow year and the returns are low—let’s say 8%—you’ll only have $72,000, or you’ll need to dig into your principal, which will lower your overall returns for future years and prevent you from holding a nest egg of money in case of emergencies.

In many places in the US, this is considered a lot of money and plenty to live comfortably, especially if you downsize or choose a location with a lower cost-of-living. But ultimately, It’s up to you to decide if this is enough savings to live off of for the rest of your life, as you weigh your spending habits and the major costs you will likely see during retirement, such as:

Major Costs to Consider During Retirement

• Housing: Housing prices continue to increase; if you don’t own your home and are renting, you should expect that you will be paying more for housing during retirement than you are now. In addition, keep in mind that your home maintenance costs will likely rise in retirement as you might not be as capable of doing certain tasks.
• Healthcare: The average 65-year-old couple today will spend around $12,000 on health care in their first year of retirement. It’s possible this number could be lower for you, if you are in great health, but it also could be much higher if you require the care of specialists or have any health issues that need to be addressed.
• Transportation: If you own a car, expect that gas prices will rise. If you don’t or are unable to drive, you’ll need to factor in alternate means of transportation, such as taxis or car-sharing services.

With this much in your savings, you might also be considering some special vacations or activities that cost more—consider this when you map out your yearly spending and budget for retirement.

It’s also extremely important to remember that inflation, while usually jumping about 1–2% per year, can jump to higher rates and reduce your spending power. Note that there are many places in the world that are significantly less expensive than the United States, and many retirees choose to live in these places in order to make their retirement savings stretch or to live more luxuriously. Consider Mexico, South America, and some parts of Asia if you seek a lower cost-of-living—$900,000 can go much farther and allow you to live with fewer financial constraints.

That said, there are many places in the US where your $90,000 income can allow you to retire comfortably. Lots of data shows that there are even places on the coasts and near the beach where an annual income of $90,000 is very workable. Consider living in:

• Olympia, Washington
• Spokane, Washington
• Oxnard, California
• Ventura, California
• Virginia Beach, VA
• Myrtle Beach, SC

Overall, $90,000 is enough to give you a wide range of places with different climates and vibes. If you have your heart set on an oceanfront home in Maui or want to live lavishly during retirement, try to save more money or wait to retire until you turn 70, when you can get the maximum benefit from your Social Security. Another option is to retire from your full-time job while keeping some part-time work to boost your monthly cash flow.

When weighing where to move for retirement, make sure to research city and state income taxes, and understand which sources of retirement income are taxed in each location. Some states have no income tax at all, while others will tax all of your retirement income—including social security. If you’ve got your heart set on the west coast, know that the state of Washington does not tax income at all, so a retirement savings of $900,000 can go much further there, even if the cost of living is a little higher than interior or southern states.

Factors to Consider When Figuring Out How Much You Need for Retirement

• Cost of living: Expect the cost-of-living to rise each year. Typically, inflation jumps between 1 and 2% each year, but since the COVID-19 pandemic, we have been in a period of high inflation that has exceeded that. This means that the cost of everyday goods, such as food, clothing, and movie tickets, will rise, and your dollar won’t go as far to pay for these items. Make sure to calculate your future income needs based on a higher inflation rate.
• Taxes: It’s likely that you’ll pay lower taxes overall than you did when you were working—as you will be making less money—but each state has its own tax laws. Some, such as Colorado and Connecticut, tax social security. If you think you’ll be in a higher income bracket during retirement, consider opening a Roth IRA.
• Lifestyle: Do you want to live similar to the way you live now, or would you like retirement to be more luxurious, with more travel? Alternatively, would you consider downsizing? Many people choose to sell their home and live somewhere smaller during retirement, to save on costs, while others want to stay in their homes and in their neighborhood. In retirement, where you live won’t be tied to your career, so you’ll need to consider the best place to live and your overall lifestyle given your budget and savings.
• Health: Health is a major consideration when deciding how much you need for retirement. If you are healthy, it’s possible you’ll live a long life, and will need ample income to sustain you for those extra years. If you have a medical condition, you might need to see specialists, and need to account for those costs and how much Medicare will cost you.
• Location: Tax considerations—both at the state and city level—will be a major consideration, as will the cost of housing and overall cost of living. You should also take into account if you live somewhere that requires you to drive most places, as transportation is another major cost factor.
• Income sources: Beyond your Social Security, you should take a look at your various income sources. You might have rental income property, a hefty IRA, or other investment vehicles to pay for retirement. Some retirees enjoy work, so instead of retiring completely, they take on a part-time job to supplement their monthly pay. The other side of income is spending—make sure you do a deep dive on your spending and calculate where you can cut back during retirement.

How to Retire on $900K by Age

As you’re figuring out how much your Social Security payout will be, it’s important to look at what $900,000 in retirement savings would look like, divided over a number of years. The table below uses an average life expectancy of 77, but keep in mind that living longer could further reduce these amounts.

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Frequently Asked Questions

Can you live off monthly interest on $900,000?

If your annual returns are 5%, you would be working with $45,000 per year or $3,750 per month. Returns can always be higher or lower than this, depending on your investments—if you aren’t confident in your current portfolio, make sure to talk to a Certified Financial Planner to come up with a solid strategy. One thing to note: the average cost of a one-bedroom in the US is $1,487. Using our calculation above, that would leave you with $2,263 for your other expenses, some of which might be higher than they were while you were working—medical care for instance. By choosing to live in a less expensive location with low or non-existent income taxes, you can make your $900,000 stretch very far.

Can a couple retire on $900,000?

Stretching $700,000 for two people requires significant financial planning and strategy. If both partners are in excellent health, they may live longer, meaning the funds need to cover additional years. Healthcare costs can also be a significant factor, especially if either partner has medical conditions requiring ongoing care. Ideally, the couple should look for ways to reduce spending to make the $900,000 work effectively. One partner might also consider working part-time to supplement income. It's crucial to calculate the combined Social Security benefits and understand local and state taxes, as these will impact the overall retirement income.

Can I retire at 50/55/60/65 with $900,000?

Determining when you can retire with $900,000 requires a thorough review of your lifestyle, desired retirement plans, and current expenses. The best approach is to consult with a Certified Financial Planner who can assess your current investments and provide tailored advice. They may suggest adjustments to your spending habits or identify areas where you can cut back, allowing you to retire at your preferred age. It's essential to have a strategy that accounts for inflation, healthcare costs, and unexpected expenses that may arise throughout your retirement years.