I Have $1 Million. Am I Good to Retire Now?

Is $1 million enough money to allow you to retire with confidence?

Becoming a millionaire is a big accomplishment, but if you actually achieve it and have a seven-figure investment account balance, will you be set for life and able to support yourself in comfort throughout the rest of your life without extra income from work coming in? 

Here’s what you need to know about how far $1 million will go in covering the necessities once you don’t have paychecks coming in anymore. 

Are you good to retire once you have $1 million?

A million dollars is undoubtedly a lot of money, and plenty of people never grow their retirement account balance to seven figures, yet they still manage to retire anyway. 

However, when you start breaking down the amount of income $1 million in retirement investments can produce, then you may find that it’s not necessarily enough for you to stop working– depending on the kind of retirement lifestyle that you want to lead. That’s because you have to maintain a safe withdrawal rate, so you don’t go broke. It’s not like you can just spend your entire million as you need it.

Experts recommend a 3.7% withdrawal rate to ensure your money stands a solid chance of lasting for retirement, which would mean that $1 million invested only gives you around $37,000 in income to live on.

Of course, you will likely also have Social Security income coming into your household once you retire, unless you’re retiring before you claim benefits. With an average monthly benefit of just $1,976, though, these benefits are only going to go so far in helping you support yourself. Plus, if you want to max out these benefits, you can’t claim them until 70, so you may have to wait a long time to start accessing Social Security income — or accept a lower benefit due to an early claim.

Will the income from $1 million be enough?

You’re going to need to aim for replacing around 80% of your pre-retirement income to be able to maintain a similar living standard compared to what you enjoyed while on the job. If you’re hoping to upgrade your lifestyle as a retiree, then you’ll need to replace more than that — perhaps your entire pay or even more than you were making while working. 

If you are retiring early, there’s a good chance you’ll also have additional costs to consider as well. For example, if you had relied on your company to help subsidize your health insurance premiums and you now have to buy individual healthcare coverage because you have retired at an age when you’re still too young for Medicare,  you can expect significant extra costs for insurance premiums on the open market.

Consider all these costs you have to cover so you can determine if your $37,000 from your nest egg plus your Social Security benefits will give you the income that you need– plus a little financial cushion in case of unexpected costs.  

A financial advisor can help you set a retirement budget and determine if you have enough with your million or whether you should save more.  If you have enough, your advisor can help you to decide how best to allocate your assets to ensure that your million does last. If you aren’t quite on track yet, your advisor can work with you to set a retirement goal and make a detailed plan to make it happen.

That way, when you do retire, you’ll have the money you need for the life you want and the peace of mind that comes with knowing you worked with an expert to ensure you didn’t fall short.

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