Is $1 Million Enough To Retire?

For many people, $1 million is enough to retire. But whether it will be enough for you depends on several factors, including your anticipated lifestyle, your estimated healthcare costs, inflation, and how long you expect to live. Below, learn how much you’ll actually need for retirement—and whether $1 million will be enough. 

Key Takeaways

• When determining whether $1 million is enough to retire, you should consider factors such as your lifestyle, your healthcare costs, inflation, and your longevity.
• One rule of thumb is to estimate that you will need 80% of your current income to sustain your standard of living during retirement.
• Various retirement savings strategies, such as 401(k) plans and IRAs, can help you maximize your savings.
• Social Security can also play a role. As of October 2024, the average monthly benefit for a retired worker is $1,924.35.

How to Determine Your Retirement Expenses

These factors will help you calculate how much you’ll need to pay for your living expenses.

Lifestyle Expectations

How you want to spend your retirement will help determine how much money you need once you quit working. For instance, do you plan to travel often? Buy a boat and spend your days on the water? Join the country club and work on your golf swing? These interests will cost more to fund than if you plan to spend time at home working on your garden or volunteering in your community.  

Healthcare Costs

While you will trade paying for a private health insurance plan for Medicare after you turn 65, you’ll still have medical expenses in retirement. Medicare won’t cover all of your expenses, so you may need supplemental insurance and/or a prescription drug plan plus savings to pay for any out-of-pocket costs. As your health changes as you age, these expenses could increase. 

Inflation

With inflation, the cost of goods and services typically increases over time, reducing how much you can purchase with your dollars. It’s important to have enough retirement savings to compensate for this increase. 

Longevity

If your family members tend to live a long time, you, too, could have a long retirement. It’s important to have enough savings to cover 30 years or more. Insurance companies will base calculations based on statistical estimates around actuarial data.

Retirement Savings Sources

Most American options for retirement are opt-in, meaning you have to organize your own participation. To help you maximize your savings, there are many traditional retirement savings sources—including 401(k) plans and those like it, individual retirement plans (IRAs), Social Security benefits, and part-time work—you can leverage. Some people also have access to pensions, while others will invest in annuities, life insurance, real estate, brokerage accounts, and other types of savings vehicles.

401(k) Plans

A 401(k) plan is a tax-advantaged retirement savings account where you contribute funds that are then invested. Many employers match a percentage of employee contributions, which can boost your savings. (The average match is 4.6%. The median match is 4.0%)

“Keep in mind that your company match is not the max you can contribute to a 401(k),” says Jay Zigmont, PhD, CFP®, founder of Childfree Wealth in Mt. Juliet, Tennessee.

In 2025, the 401(k) contribution limit is $23,500, and there is an additional $7,500 catch-up contribution option if you are 50 or older. So if you’re 50 or older, you can contribute up to $31,000 in 2025. (Those numbers are $23,000 and $30,500 for 2024.)

There are two types of 401(k) plans: traditional and Roth. A traditional 401(k) plan funds your account with pre-tax dollars, while a Roth 401(k) plan funds your account with post-tax dollars. When you withdraw funds from a traditional 401(k) in retirement, you will pay taxes on that money, using the income tax bracket you’re in during retirement. Withdrawals from a Roth 401(k) are tax- and penalty-free, as long as you’ve had the account for at least five years and you’re over age 59 ½.

To decide which plan best works for you, consider the best time for you to pay your taxes. If you wait until retirement, you may be in a lower tax bracket, meaning you will pay less in taxes. On the other hand, if you wait until retirement to pay taxes on these funds, it will reduce how much you have for your living expenses.  

Warning

48% of small businesses worry they cannot afford to offer a retirement plan to employees, but those workers can still open a tax-advantaged retirement account with an IRA.

IRAs

An individual retirement account (IRA) can be a useful retirement savings vehicle.

There are several options from major companies, including Roth IRAs, traditional IRAs, SEP IRAs, and SIMPLE IRAs. These accounts each have limits on contributions—for a traditional or Roth IRA in 2025 and 2024, it’s $7,000 if you’re under 50, or $8,000 if you’re 50 or older—and they can be a great supplement to other retirement savings accounts. They can also offer more flexibility for what you invest your funds in than some 401(k)s.  

Other Investment Options

There are many other ways to invest for retirement. If you’ve exhausted the tax-advantaged options above (the 401(k) and IRA), you could open a taxable brokerage account and invest with mutual funds, stocks, and bonds. Fixed annuities and certificates of deposit (CDs) are other options, though they often offer more modest rates of return. It’s important to talk with a financial advisor to determine which of these retirement investment options would be right for you. 

Social Security Benefits

Once you become eligible, Social Security benefits can supplement your other retirement savings.

“Maximizing Social Security benefits is essential,” said Karla Dennis, founder & CEO of KDA Inc., a tax strategy agency in La Palma, California. “You can do this by first by understanding your benefits, creating an account on SSA.gov, and checking your Social Security statement regularly so you can understand how [the] timing of receiving Social Security can benefit you. Delaying receiving Social Security until full retirement age or later can lend itself to higher monthly payments.” 

You are eligible to start taking Social Security at age 62, but your benefits are likely to be about 30% less than if you take Social Security starting at your full retirement age (it’s 67 for those born in or after 1960).

Important

If you delay collecting Social Security, your benefit will increase by 8% each year until age 70. There’s no incentive to wait past age 70.

Part-Time Work

Some people are not ready to stop working. Others hope to embark on a new career during retirement. Continuing to work can provide money to pay for your living expenses, fund your hobbies, and help cover medical costs. 

Other Potential Sources of Income During Retirement

Other sources of income during retirement include a pension (an employer-funded, defined-benefit retirement plan), rental property income, and life insurance policies. Talking with a financial advisor can help you determine which of these, if any, are right for your retirement planning goals. 

Note

Professor Teresa Ghilarducci, a labor economist and retirement expert, argues that the 401(k), which was never intended to be the primary retirement savings vehicle for most American workers, only helps high earners and is riddled with misaligned incentives. 

The 4% Rule and Safe Withdrawal Rates

To help ensure you have enough money throughout retirement, experts recommend you withdraw no more than 4% of your retirement savings each year, adjusted for inflation. This 4% rule is designed to sustain you for thirty years of retirement.

“The taxation of retirement income can make it tricky to use rules of thumb like the 4% rule,” says Dana Anspach, founder and CEO of Sensible Money LLC in Scottsdale, Arizona. “The 4% rule would suggest you can safely withdraw $40,000 per year from a $1 million withdrawal, periodically increasing the withdrawal amount to keep up with inflation. However, taxes are not considered.”

4% Rule Example

Let’s say you have $1 million in retirement savings. Under the 4% rule, that equates to $40,000 per year. That could be enough if you live in an area with a low cost of living, you own your home, and you don’t plan to travel much. And this doesn’t count Social Security benefits—the average benefit for a retired worker as of October 2024 is $1,924.35 per month. 

But if you live in a high-cost-of-living location, don’t own your home, want to travel frequently, and/or have a lot of expenses, that $40,000–even with Social Security–might not cut it. In addition, if you are withdrawing from accounts funded with pre-tax dollars, you will have to pay taxes on those funds, which will reduce your actual amount received. 

As such, you would need to increase your retirement savings or supplement your retirement income with other sources, such as a part-time job.  

To help you budget for your retirement, try our budgeting calculator to see what adjustments you should make to meet your savings goals. 

What is the Biggest Expense During Retirement?

According to the U.S. Bureau of Labor Statistics, the biggest expense for consumers is housing, which accounts for 33% of all annual expenditures.

How Much Should You Budget for Healthcare in Retirement?

According to the annual Fidelity Retiree Healthcare Cost Estimate, a 65-year-old who retired in 2023 should expect to pay approximately $157,500 for healthcare costs during retirement.  

What Is the Average Social Security Benefit?

For a retired worker, the average Social Security monthly benefit is $1,924.35 as of October 2024.

The Bottom Line

While $1 million may be enough for many retirees to cover their costs during retirement, it may not be enough for everyone.

Saving money through retirement accounts such as a 401(k) or an IRA, investing in stocks and bonds, and relying on Social Security all could help provide the funds you need to pay your bills and other expenses. Working with a financial advisor can help you determine which tools are best for achieving your financial goals so you can enjoy retirement.