Can You Retire On $1 Million

Can you retire on $1 million? It depends. $1 million may seem like a lot of money but for someone who is in the habit of spending more than they earn, it may not be enough. The amount of money you need to retire will be determined by many factors including your current health, income, debts, savings, and lifestyle. There are people who have retired on less than $1 million and enjoyed a comfortable lifestyle. While others who amassed a small fortune were forced to return to the workplace after running out of money. 

Sam Dogen founded a company called Financial Samuari then retired in his 30’s after saving $2.5 million. Twelve years, two children, and many expenses later he was forced to return to work after realizing his passive income wasn’t enough to support his family. Life is about choices, and it was a bad choice for Sam to retire early without any planning. He never thought about how much money he would need per year to live comfortably in retirement, or about the added expenses that come with marriage and family. 

When planning for retirement, the only number you should be concerned with is the amount of money you’ll need per year to maintain your current lifestyle when you are not working. Don’t forget to consider the impact of inflation and taxes. Once you determine your required yearly income, deduct your potential Social Security benefits and pension payments to determine how much you will need to withdraw from your retirement accounts per month. Then multiply the monthly withdraws times 12 months, then by the number of years you may live. For example, if you need to withdraw $4000 per month from your retirement savings you would need to take $48,000 per year from your retirement savings to maintain your lifestyle. At that rate, even with a balanced portfolio realizing positive gains, $1 million would last approximately 22 to 25 years.

The best way to ensure your money will last throughout your lifetime is to seek professional help. Working with a fiduciary financial planner can be a game changer for pre-retirees and retirees. Fiduciaries have a legal and ethical obligation to act in the best interests of their client, and our fiduciaries have a passion for helping clients realize their retirement dreams. Call Alloy Wealth at 800-689-3935 to speak with one of our retirement planning experts.