What’s it like to retire with about $1 million in savings? The Wall Street Journal took a look at four retirees who have between $1 million to $1.6 million in assets. It’s an interesting read if you’re in or near retirement.
For retirees able to accumulate $1 million in savings, the funds translate into inflation-adjusted income of $40,000 in the first year of a three-decade retirement using the 4% spending rule. With the addition of the average annual Social Security payment for retirees of about $20,000, a $1 million nest egg can replace about 85% of a $70,000 median household income.
Many people approaching retirement don’t have $1 million, given households headed by people ages 65 to 74 have retirement-account savings of $426,000, on average, according to the Federal Reserve. Still, “$1 million is a reasonable target for a lot of people,” said David Blanchett, head of retirement research at PGIM, the asset-management arm of Prudential Financial Inc.
For those striving to hit the $1 million mark, questions and doubts linger. Is $1 million enough and what does $1 million actually buy in retirement? How far that money goes often comes down to health, location, luck and timing.
To get some insight into what retiring on $1 million looks like today, we spoke to four retirees with nest eggs in that ballpark. They shared insights about how they spend their time and money, what has given them joy or anxiety, and how their expectations of life in retirement have measured up to reality.
Here’s What a $1 Million Retirement Looks Like in America – WSJ
From personal experience I don’t think $1million is enough. Financial advisors often cite the “4% rule”. It’s a rule of thumb that means you withdraw 4% of your portfolio every year for about 30 years.
The 4% rule is a common rule of thumb in retirement planning to help you avoid running out of money in retirement. It states that you can comfortably withdraw 4% of your savings in your first year of retirement and adjust that amount for inflation for every subsequent year without risking running out of money for at least 30 years.
What is the 4% Rule? – Motley Fool
If you live frugally and stay healthy throughout your retirement then maybe $1 million is enough. You’ll need to worry about emergencies or extra expenses. You can do it but it won’t be all puppies and roses.
$2 million will get you closer to living out your retirement with peace of mind. The sweet spot to me in 2023 through maybe 2025 is $3 million. That amount of money invested conservatively in dividend stocks plus Social Security will virtually guarantee a worry free retirement.
I say this as an early retiree living off my portfolio without Social Security. My wife won’t hit full retirement age until 2031 and I won’t until 2034. The choices we make every day are set with that goal in mind. I’ve found over the last few years that what you thought you spent annually is about 50% less than reality.
Can it be done on $1 million? Sure. But don’t let your guard down.