It’s the million-dollar question.

Is $1 million enough to retire?

A lot of people wonder exactly how much money they’re going to need in order to enjoy a comfortable retirement.

One common benchmark for retirement savings is $1 million. “Surely, if I’ve saved up a million bucks, I’ll be able to retire comfortably,” is how this thinking traditionally goes.

But is this really the case? Is a million dollars enough money to ensure a financially secure future?

A recent analysis determined that a $1 million retirement nest egg may only last about 20 years depending on what state you live in.¹

Based on this, if you retire at age 65 and live until you turn 84, $1 million will probably be enough retirement savings for you. However, it’s important to remember there is no one-size-fits-all amount. Rather than shooting for a specific number like $1 million, striving to save as much as you reasonably can is a good goal.

Factors to consider: How long will $1 million last in retirement?

How much you save for your future depends on several personal finance factors and your goals, including the key ones listed below:

1. Your desired retirement lifestyle

Do you have a picture in your mind of what retirement will look like for you? For example, do you plan to travel extensively, dine at the best restaurants, spend time with children and grandchildren (and spoil the grandkids), tour the country in a motorhome, buy a yacht or sailboat, or join a country club? If so, you may need a lot of money to support this kind of lifestyle.

On the other hand, if you envision a simpler and more frugal retirement lifestyle, or you are one of the lucky few who has a robust retirement pension, you might have plenty of money in the bank to retire on and still leave a generous inheritance for your heirs.

2. Your risk tolerance and rate of return

When entering retirement, many people adjust their asset allocation to a less risky mix of stocks, bonds and cash alternatives.² While reducing volatility, this generally comes with an expectation of lower rates of return throughout retirement.

Finding the right balance between risk and return could potentially stretch your retirement nest egg significantly further if that money was invested more aggressively throughout retirement. But this could also subject your retirement funds to higher risk of loss, which might jeopardize your retirement financial security.

Managing the risk-reward tradeoff is something that each individual and couple must seriously consider. It might be smart to discuss this with a financial professional.

3. Your health and life expectancy

Healthcare expenses can eat up a big chunk of your retirement nest egg, depending on the type of healthcare coverage you have and what health issues you encounter during your retirement. In fact, according to a recent study, a healthy 65-year-old couple could   see their annual healthcare costs go up by nearly 6% per year in retirement because of inflation.³

While Medicare will partially cover many healthcare expenses, there will still be copays and other out-of-pocket medical expenses you’re responsible for. If you are in poor health or experience major medical complications after you retire, this could drain your nest egg faster than you may have planned.

Further, if your family has a history of longevity, you might live longer than average. If you end up outliving the average lifespan, you might need a healthy chunk of change to last throughout retirement. On average, according to the Social Security Administration’s 2019 Period Life Table, a 65-year-old man today can expect to live until 84 while a 65-year-old woman can expect to live until 86.⁴

4. Where you live in retirement

It’s important to evaluate the overall cost of living in any given state, in addition to your state’s tax rates. Some retirees choose to relocate in retirement to reduce their overall expenses.

Read more: States that don't tax retirement income

5. How much income you receive in retirement

Your retirement savings probably won’t be your only source of income in retirement. You’ll probably receive Social Security income and you also might choose to work part-time in order to generate additional income. Every dollar of additional income you receive in retirement will help your retirement nest egg last longer and help improve your chances of retiring with more money.

6. The impact of inflation

Inflation erodes the purchasing power of your retirement savings because it costs more money to buy the things you need — everything from food and groceries to gasoline, clothing and entertainment. After years of low inflation, the U.S. economy has recently experienced an inflation spike. If this continues for a long period of time, it could jeopardize what your nest egg will enable you to purchase.

Read more: How to protect against inflation

How to increase your savings

Asking if you can retire with $1 million presumes that you will be able to save $1 million in the first place.

Here are three steps to help you reach your goals and potentially increase your retirement savings:

1. Aim to save 10% (or more) of your annual pretax income for retirement. 

This assumes an approximately 40- to 45-year working career during which you are actively saving money for your retirement, such as between ages 25 and 67. If you participate in an employer-sponsored retirement plan at work — such as a 401(k) or 403(b) plan — and your employer matches your contributions, this could reduce the amount you need to save. Employer matches represent a boost on what you’re contributing, so it usually makes sense to contribute at least enough to an employer-sponsored retirement plan to qualify for a full match.

2. Leave your retirement savings alone. 

One of the biggest hindrances to building your retirement savings is withdrawing money from your retirement account before you retire. Not only might you incur early withdrawal penalties, but you’ll miss out on potential long-term compounding of returns on your savings. Compounding is one of the biggest friends you may have when it comes to accumulating a retirement nest egg.

3. Consider using financial tools. 

Are you prepared for retirement? What lifestyle can you afford to maintain? Will moving out of state significantly alter your retirement potential? Find out for yourself if your retirement plan is on track. Empower’s financial tools can help you determine how much money you might need to fund your golden years.  

Get the Empower Retirement Planner to determine how much money you may need to save for retirement. You can also evaluate alternative plans in order to determine whether $1 million might be enough for you. Consider talking to a financial professional for more detailed guidance on your retirement saving strategies.