Is $3 Million Enough to Retire on in America?

Retiring with $3 million in the bank might sound like complete financial security and freedom from the workforce forever. At a time when the FIRE lifestyle is so prominent, looking to retire with millions at your disposal might make you feel like you can travel the world and enjoy everything around you. 

Unfortunately, there are multiple scenarios in which you must question if $3 million is truly enough. For those who live in a very high-cost-of-living area or know they might have significant medical expenses while retired, this amount of money might not go as far as you think or hope. 

What Do You Need for Retirement? 

Generally speaking, when you think about what you need from your $3 million for retirement, you should follow the 4% rule. As this Safe Withdrawal Rate is the current gold standard of retirement living, it would provide you with $120,000 per year, and this number should be around 70-80% of your pre-retirement income to maintain your standard of living. 

Of course, you also have to factor in inflation, which is currently 2.9% in 2025, so this $120,000 annual withdrawal will need to account for inflation every year to keep up with changing costs in your life. Of course, the hope is that with $3 million invested, you are making enough investment-wise to keep pace with inflation and potentially pull out more money if and when necessary. 

However, if you make $300,00 per year (or made while working), the 4% rule will likely feel restrictive as it will require dramatic lifestyle and spending cuts. This is also before any consideration goes into taxes, as withdrawals from a traditional 401(k) or IRA are taxable like regular income. In other words, you will lose 22% of this money, assuming it’s your only income pre-Social Security, meaning $120,000 is more like $94,000 after taxes. 

Where $3 Million Will Be Sufficient

Moderate Lifestyle In Medium-Cost Area

If you are considering living somewhere in the Midwest or Texas, where the overall cost of living is considered “medium” and housing is below the national mean, you could live on $120,000 in withdrawals and maintain a comfortable standard of living. This means that you would be able to have a comfortable mortgage, travel a few times a year, dine out several times a week, and continue to participate in recreational activities on an ongoing basis so that you do not get bored during retirement. 

Take Raleigh, North Carolina, where the average cost of living is between $50,000 and $70,000 for moderate expenses, which would leave room for hobbies and travel. Adding Social Security earnings could make another $20,000 to $30,000 available depending on your age, making for an even larger buffer between your expenses and free cash flow. 

Later Retirement Age 

What about if you step away from the workforce at 70 or slightly after? There is every reason to suspect that $3 million should be sufficient to live comfortably. Of course, this will still depend on where you live, as a medium cost-of-living area will play a big factor. 

However, someone who can claim Full Retirement Age benefits and then some at 80 might only need savings that last for 15-20 years, maybe even 25 years in a best-case scenario. As a result, you could consider going above the 4% rule and pulling out $150,000 with a 5% safe withdrawal rate at this age. Combined with a Social Security number of 130% plus, if you start receiving money at 70, you will live a very comfortable lifestyle full of travel and daily activity while having a buffer in long-term medical emergencies. 

Retiring at 50

This one will be a challenge, but if you are looking to retire at 50 with $3 million, the answer to whether or not it’s enough to retire will highly depend on your return rate. If you have a 3% return rate, follow the 4% rule, and assuming you stay within the 22% tax rate, you could likely have enough to live comfortably before your money eventually runs out at 87 years of age. If you increase this to a 5% average rate of return, the $3 million lasts comfortably beyond 87, but this depends on a moderate lifestyle in a medium-cost-of-living location. 

When $3 Million Won’t Be Enough

Expensive Metropolitan Areas

If you hope that $3 million will be enough to retire in a high-cost metropolitan area like Chicago, New York, or Boston, there is no question that this won’t be enough money. Considering that housing expenses alone could take up a heavy chunk of your $120,000 safe withdrawal rate between a mortgage and taxes, your livable income drops dramatically. 

It’s more likely that you would need between $150,000 and $200,000 in annual income, post-taxes, to live comfortably, and as a result, you would deplete the $3 million, assuming no investment growth, in no more than 20 years time. 

Significant Healthcare Needs

While this is more likely to occur when you are older, if you are someone hoping to retire on $3 million only to learn you have long-term healthcare needs, you will run out of money quickly. The prevailing thought is that annual nursing home costs for 12 months now exceeds $100,000 and isn’t covered by Medicare or private insurance. 

In these cases, you would need to withdraw this money from your $3 million, which means you have exhausted your annual $120,000 safe withdrawal rate on just the nursing home, never mind any other expenses you might have, like a mortgage, food, car, utilities, entertainment, travel, and more. 

Lifestyle Expectations 

Luxury Living

If you’re used to living a luxury lifestyle pre-retirement with expensive cars, a big house, and luxury travel that would cost upward of $20,000 per trip, there is little question that $3 million won’t be enough for you. 

Unless you can cut your standard of living dramatically, there is little hope that this money will last for more than 10 years or so before you start to run out. Even in the best-case scenario where this money lasts 15 years, it’s only 15 years before you return to the workforce. 

This is especially true if you try to retire before you turn 60, when you won’t have Social Security or Medicare benefits and can’t count on an average rate of return to sustain your pre-retirement lifestyle. 

Comfortable Lifestyle 

The good news is that if you hope only to live a comfortable lifestyle in a geographic location with a low cost of living, $120,000 will likely last a long time at the 4% safe withdrawal rate. 

If you factor in Social Security benefits after hitting 67 and Full Retirement Age, things will get even more manageable, but this will largely depend on age. If you retire at 40 versus 67, you’ll need to be far more aggressive in the market to get a rate of return that can overshoot the 4% safe withdrawal rate, otherwise, your money could be gone before you hit 67. 

This is where and why the big difference between urban, rural, and suburban lifestyles will become a factor in determining how far $3 million can and will go. 

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