Is $1 Million Enough to Retire? A Practical Income and Longevity Analysis

A $1 million retirement portfolio can generate meaningful income, but whether it is enough depends on your spending, longevity, and withdrawal strategy. In many cases, a balanced approach suggests withdrawing around 3% to 4% annually, which translates to $30,000 to $40,000 per year before taxes. At Greenbush Financial Group, our analysis shows that $1 million is often a solid foundation, but rarely a complete solution without additional income sources like Social Security.

How Much Income Can $1 Million Generate in Retirement?

The most common starting point is the safe withdrawal rate, which estimates how much you can withdraw annually without running out of money.

Typical Withdrawal Guidelines

• 3% withdrawal rate = $30,000 per year

• 4% withdrawal rate = $40,000 per year

• 5% withdrawal rate = $50,000 per year (higher risk of depletion)

What This Means in Practice

How Social Security Changes the Equation

For most retirees, Social Security becomes a critical piece of the income plan.

Example Scenario

• Portfolio withdrawal (4%) = $40,000

• Social Security benefit = $25,000

• Total annual income = $65,000

This is where $1 million becomes much more realistic.

Key Insight

Without Social Security, $1 million alone often supports a moderate lifestyle. With Social Security, it can support a comfortable retirement for many households, depending on spending habits.

Inflation: The Silent Risk to Your Retirement Plan

One of the biggest risks retirees face is rising costs over time.

Example

• Year 1 expenses = $60,000

• 20 years later at 3% inflation ≈ $108,000

This is why simply matching your current expenses is not enough. Your income needs to grow over time, which will usually require keeping a portion of your portfolio invested.

At Greenbush Financial Group, we emphasize maintaining a growth component even in retirement portfolios to help offset inflation risk.

How Long Will $1 Million Last?

The longevity of your portfolio depends heavily on:

• Withdrawal rate

• Investment returns

• Market volatility

• Lifespan

General Guidelines

• 3% withdrawal → Often sustainable for 30+ years

• 4% withdrawal → Historically sustainable, but not guaranteed

• 5%+ withdrawal → Increased risk of running out of money

Sequence of Returns Risk

Early market downturns in retirement can significantly impact how long your money lasts. This is known as sequence of returns risk, and it is one of the most important planning factors.

What Lifestyle Does $1 Million Support?

The answer varies widely depending on location, spending, and lifestyle expectations.

Likely Scenarios

Modest Lifestyle

• Lower cost-of-living area

• Limited travel

• Paid-off home

• Income need: $40,000–$60,000

Moderate Lifestyle

• Some travel and discretionary spending

• Healthcare costs rising over time

• Income need: $60,000–$90,000

High-Spending Lifestyle

• Frequent travel, luxury expenses

• Higher healthcare and insurance costs

• Income need: $100,000+

In many cases, $1 million alone may fall short for higher spending lifestyles without additional income sources.

Tax Considerations on Retirement Income

Not all $40,000 of income is actually spendable.

Key Tax Factors

• Traditional IRA/401(k) withdrawals are taxed as ordinary income

• Roth IRA withdrawals may be tax-free

• Social Security may be partially taxable

• Required Minimum Distributions (RMDs) begin in your 70s

At Greenbush Financial Group, tax-efficient withdrawal strategies are often the difference between a plan that works and one that struggles.

Strategies to Make $1 Million Last Longer

There are several ways to improve the sustainability of a $1 million portfolio.

Planning Strategies

• Delay Social Security to increase guaranteed income

• Use Roth conversions to reduce future taxes

• Adjust withdrawals based on market performance

• Maintain a diversified portfolio with growth exposure

• Reduce fixed expenses before retirement

Real-World Insight

We often see that retirees who remain flexible with spending and withdrawals tend to have significantly better outcomes than those who follow a rigid income plan.

When $1 Million May Not Be Enough

There are specific situations where $1 million may fall short:

• Early retirement (before age 62 or 65)

• High healthcare costs before Medicare

• Significant debt or mortgage payments

• High inflation environments

• Supporting family members financially

• Market downturns and investment mismanagement

In these cases, additional planning becomes critical.

Final Thoughts

A $1 million portfolio can absolutely support retirement, but it is not a one-size-fits-all solution. At Greenbush Financial Group, our analysis shows that success depends on how income is generated, how taxes are managed, and how flexible the retiree is with spending.

For many households, $1 million works best when combined with Social Security and a well-structured withdrawal strategy.

Rob Mangold

About Rob……...

Hi, I’m Rob Mangold. I’m the Chief Operating Officer at Greenbush Financial Group and a contributor to the Money Smart Board blog. We created the blog to provide strategies that will help our readers personally, professionally, and financially. Our blog is meant to be a resource. If there are questions that you need answered, please feel free to join in on the discussion or contact me directly.

1. Can you retire comfortably with $1 million?
   Yes, but it depends on your spending level, location, and whether you have additional income like Social Security.
2. How much monthly income does $1 million generate?
   At a 4% withdrawal rate, about $3,300 per month before taxes.
3. Is the 4% rule still safe in 2026?
   It is a useful guideline, but many financial planners now recommend closer to 3% to 4% depending on market conditions.
4. What is the safest withdrawal rate for retirement?
   Around 3% is generally considered more conservative for long retirements.
5. How long will $1 million last in retirement?
   It can last 25 to 30+ years depending on withdrawal rate, investment returns, and market conditions.

Borrowing from Your 401(k)? One Wrong Move Could Trigger a Massive Tax Bill

Borrowing from your 401(k) might seem like an easy way to access cash, no credit check, low interest, and you’re paying yourself back. But one wrong move can trigger immediate taxes, penalties, and a permanent hit to your retirement savings. The IRS has strict rules on how 401(k) loans must be repaid and what happens if you leave your job before it’s paid off. Understanding those rules before you borrow can help you avoid costly surprises.

How 401(k) Loans Work

Most employer-sponsored 401(k) plans allow participants to borrow up to the lesser of $50,000 or 50% of their vested balance. Loans typically have to be repaid within five years through automatic payroll deductions, and the interest you pay goes back into your account.

On paper, it looks simple. You’re borrowing from yourself and putting the money back over time. But the biggest risk comes if your employment status, or repayment schedule, changes.

The Costly Mistake: Leaving Your Job Before Repayment

If you leave your employer, voluntarily or otherwise, with an outstanding 401(k) loan, the clock starts ticking. Under IRS rules, you must repay the entire remaining balance by the tax-filing deadline of the following year.

If you don’t repay it in time, the IRS classifies the unpaid balance as a “deemed distribution.” That means:

• The outstanding amount is treated as taxable income in that year.

• If you’re under age 59½, you’ll also face a 10% early withdrawal penalty.

Example:
If you owe $20,000 on a 401(k) loan when you change jobs and don’t repay it, that $20,000 becomes taxable income. Assuming a 22% federal bracket, you’ll owe $4,400 in federal tax, plus a $2,000 early withdrawal penalty—a total of $6,400 lost instantly.

Our analysis at Greenbush Financial Group shows that many borrowers underestimate this risk, particularly if they expect to switch jobs or retire early.

Why the Real Cost Is Even Higher

Taxes and penalties are only part of the loss. When you default on a 401(k) loan:

• You lose future growth on the money permanently removed from your retirement plan.

• You can’t simply “rollover” the unpaid balance into an IRA—it’s treated as distributed cash.

In long-term projections, a $20,000 distribution today can mean over $60,000 less in retirement savings 20 years from now, assuming a 7% annual return.

Smart Ways to Borrow Without Derailing Your Retirement

If you’re considering a 401(k) loan, these steps can help minimize the risk:

1. Understand your plan’s terms. Confirm repayment rules, interest rates, and whether you can continue contributing while repaying the loan.

2. Have a backup plan. Keep cash reserves or other assets available in case you leave your job unexpectedly.

3. Avoid borrowing for depreciating expenses. Using retirement funds for short-term needs like vacations or vehicles can compound long-term losses.

4. Check your employment stability. If you expect to change jobs soon, it’s better to wait or use other financing options.

5. Compare alternatives. A home equity line of credit (HELOC) or personal loan may cost less in taxes and missed growth over time.

At Greenbush Financial Group, we often help clients run side-by-side projections showing the real long-term cost of borrowing from their 401(k) compared to other options. In most cases, the total impact of lost compounding far outweighs the short-term benefit of easy access to funds.

The Bottom Line

A 401(k) loan can make sense in limited cases, such as paying off high-interest debt or covering an emergency expense when other options are exhausted. But understanding the repayment rules—and the risk of job loss—is critical. One mistake, like leaving your employer before repaying the loan, can trigger thousands in taxes and permanently shrink your retirement balance.

Before taking out a loan, it’s worth modeling different scenarios with a financial planner to ensure your short-term decision doesn’t create a long-term setback.

Rob Mangold

About Rob……...

Hi, I’m Rob Mangold. I’m the Chief Operating Officer at Greenbush Financial Group and a contributor to the Money Smart Board blog. We created the blog to provide strategies that will help our readers personally, professionally, and financially. Our blog is meant to be a resource. If there are questions that you need answered, please feel free to join in on the discussion or contact me directly.

FAQs: 401(k) Loan Rules and Risks

1. What’s the maximum I can borrow from my 401(k)?
   Generally, up to $50,000 or 50% of your vested balance, whichever is less.
2. How long do I have to repay a 401(k) loan?
   Most plans require repayment within five years, except when borrowing to purchase a primary residence.
3. What happens if I default on my loan?
   The unpaid balance is treated as a taxable distribution and may incur a 10% early withdrawal penalty if you’re under age 59½.
4. Can I roll my 401(k) loan into an IRA or new employer plan?
   No, loans cannot be rolled over. The balance must be repaid directly to avoid taxes.
5. Should I ever take a 401(k) loan?
   Only if the need is critical and you’re confident you’ll remain employed through the repayment period.

Company Stock In Your 401(k)? Don’t Forget To Elect NUA

For employees with company stock as an investment holding within their 401(k) accounts, there is a special distribution rule available that provides significant tax benefits called “NUA”, which stands for Net Unrealized Appreciation. The NUA option becomes available to employees who have either retired or terminated their employment with a company and are in the process of rolling over their 401(k) balances to an IRA. The purpose of this article is to help employees understand:

1. How does the NUA 401(k) distribution option work?

2. What are the tax benefits of electing NUA?

3. The immediate tax event that is triggered with an NUA election

4. What situations should NUA be elected?

5. What situations should NUA be AVOIDED?

6. Special estate tax rules for NUA shares

The Common Rollover Mistake

For employees who have company stock in their 401(k) and do not receive proper guidance, they can easily miss the window to make the NUA election, which can cost them thousands of dollars in additional taxes in their retirement years. When employees leave a company, it’s common for the employee to open a Rollover IRA and process a direct rollover of their entire balance in their 401(k) to their IRA to avoid triggering an immediate tax event as they move their retirement savings away from their former employer.

Example: Tim retires from Company ABC and has a $500,000 balance in that 401(k) plan; $200,000 of the $500,000 is invested in ABC company stock. He sets up a traditional IRA, calls the 401(k) provider, and requests that they process a direct rollover of the full $500,000 balance from his 401K to his IRA. The 401(k) platform processes the rollover, and Tim deposits the $500,000 to his IRA with no taxes being triggered. Then, Tim begins taking distributions from his IRA to supplement his income in retirement. On the surface, everything seems perfectly fine with this scenario. However, Tim may have completely missed a huge tax-saving opportunity by failing to request NUA treatment of his company stock within his 401(k) account.

How Does NUA Work?

When an employee has company stock in their 401(k) account and they go to take a distribution/rollover from their 401(k) after they leave employment with the company, they may be able to elect NUA treatment of the portion of their 401(k) that is invested in company stock.  But what does NUA treatment mean?  When an employee processes a rollover from their pre-tax 401(k) balance to their Rollover IRA, and then takes distributions from their IRA in the future, they have to pay ordinary income tax on all distributions taken from the IRA account. However, prior to requesting a full rollover of their 401(k) balance to their IRA, an employee with company stock in their 401(k) account can make an NUA election, which allows the appreciation in the stock within the 401(k) account to be taxed at long-term capital gains rates in the future as opposed to ordinary income tax rates which may be higher.

But employees must be aware that by electing NUA, it triggers an immediate tax event for the employee.   

Here is how NUA works as an example. Sue has a 401(k) account with Company XYZ. The total balance of Sue’s 401(k) is $800,000, but $400,000 of the $800,000 balance is invested in XYZ company stock that Sue has accumulated over the past 20 years with the company.   The cost basis of Sue’s $400,000 in company stock within the 401(k) is $50,000, so over that 20-year period, the company stock has gained $350,000 in value. 

When Sue retires, instead of rolling over the full $800,000 balance to her Rollover IRA, she makes an NUA election.  The NUA election will send the $400,000 in company stock within her 401(k) account to an after-tax brokerage account in Sue’s name as opposed to a Rollover IRA account.  When that happens, Sue has to pay ordinary income tax, not on the full $400,000 value of the stock, but on the $50,000 cost basis amount of the company stock. The $350,000 in “unrealized gain” in the company stock is now sitting in Sue’s brokerage account, and when she sells the stock, she receives long-term capital gain treatment of the $350,000 gain, as opposed to paying ordinary income tax on the $350,000 gain if it was rolled over to her IRA. 

But what happens to the rest of Sue’s 401(k) balance that was not invested in company stock?  The non-company stock portion of Sue’s 401(k) account can be rolled over to a Rollover IRA and it’s a 100% tax-free event. She just pays ordinary income tax on future distributions from the IRA account.

NUA – Long-Term Capital Gains Rates

Depending on Sue’s income level in retirement, her federal long-term capital gains rate may be 0%, 15%, or 20%, which may be lower than if she had realized the IRA distribution at ordinary income tax rates. Here is a quick chart that illustrates the 2025 long-term capital gains rates by filing status and income level:

NUA Triggers A Tax Event

Now let’s go back and review the tax event that was triggered when Sue requested the $400,000 transfer of her company stock from the 401(k) to her brokerage account. Again, when the NUA is processed, she only has to pay ordinary income tax on the cost basis amount of the stock, so in Sue’s case, in the year the NUA distribution takes place, she would have to report an additional $50,000 in taxable income. The tax liability generated could either be paid with her personal cash reserve or she could liquidate some of the company stock in her after-tax brokerage account to pay the taxes.

Timing of the NUA Distribution

There is a tax strategy associated with the timing of requesting the NUA distribution. If someone works for a company until September and then retires, they already have 9 months' worth of income in that tax year. In this case, it may be beneficial to process the rollover from the 401(k) with the NUA to the brokerage account the following tax year, when the individual’s W-2 income is completely off the table, so the taxable cost basis associated with the NUA election is potentially taxed at a lower rate since there is no W2 income the following year.  

The Employee’s Age Matters for NUA

Because the cost basis of the company stock is treated like a cash distribution, if an employee takes an NUA distribution before age 55 and has already left the company, the cost basis would be subject to ordinary income tax and the 10% early withdrawal penalty. 

NUA – Age 55 Exception To The 10% Early Withdrawal Penalty

Why age 55 and not 59½? Qualified retirement plans (401(k), 403(b), 457(b) plans) have a special exception to the under age 59½ 10% early withdrawal penalty.  If you terminate employment with the company AFTER reaching age 55 and you take a cash distribution or NUA directly from the 401(k) plan, the employee is no longer subject to the 10% early withdrawal penalty. But an employee who terminates employment at age 54 and requests the NUA distribution at age 55 would still get hit with the 10% penalty because they did not separate from service AFTER reaching age 55.

The cost basis associated with the NUA distribution is treated the same as a regular cash distribution from a 401(k) plan.

When Electing NUA Makes Sense

There are certain situations where making the NUA election makes sense, and there are situations where it should be avoided.  We will start off by reviewing the common situations where electing NUA makes sense in lieu of rolling over the entire balance to an IRA.

Large Unrealized Gain In The Company Stock

In order for the NUA election to make sense, there typically has to be a large unrealized gain built up in the company stock within the 401(k) plan.  Said another way, the company stock has to have performed well within the 401(k) account. If the value of the company stock in an employee's 401(k) account is $200,000 and the cost basis is $170,000, if that employee elects an NUA and then transfers the $200,000 in stock to their brokerage account, it’s going to trigger a $170,000 immediate tax event and only $30,000 would receive long-term capital gains treatment. In this case, it’s probably not worth the tax hit.

In the example with Sue, she only had to pay ordinary income tax on $50,000 of the $400,000 in company stock, so the NUA would make more sense in her situation because she is shifting $350,000 to long-term capital gains treatment.

Ordinary Income Tax vs Long Term Capital Gains Rates

For NUA to make sense, it’s a race between what tax rate someone would pay if the money were distributed from a Rollover IRA and distributed at ordinary income tax rates versus the long-term capital gains tax rate if NUA is elected. Under current tax law, the federal tax rate jumps from 12% to 22% at $96,950 for a joint tax filer. On the surface it would seem that someone with under $96,950 in income might be better off rolling over the balance to an IRA and paying ordinary income tax rates at 12% instead of the long-term capital gains rate of 15%. However, if you look at the long-term capital gains tax rates in the table earlier in the article, if in 2025 a joint filer has income below $96,700, the long-term capital gains rate is 0%, and a 0% tax rate always wins.

Time Horizon Matters

An employee's time horizon to retirement also factors into the NUA decision. If an employee leaves a company at age 40, not only would they have to pay taxes and the 10% penalty on the cost basis of the NUA distribution, but by moving the company stock to a taxable brokerage account, they are losing the tax deferred accumulation benefit associated with the Rollover IRA for the next 19+ years.  Since the brokerage account is a taxable account, the owner of the account has to pay taxes every year on dividends, interest, and realized gains produced by the brokerage account. If the company stock is liquidated and the full 401(k) balance is rolled over to an IRA, all of the investment income avoids immediate taxation and continues to accumulate within the IRA account. For taxpayers in higher tax brackets, this may have its advantages.  

There are a lot of factors in the NUA decision, but in general, the shorter the timeline to when distributions will begin from retirement savings, the more it favors NUA; the longer the time horizon to retirement, the less it favors NUA over the benefits of continued tax deferred accumulation in a Rollover IRA account.

Reduce Future RMDs

For individuals who have a majority of their assets in pre-tax retirement accounts, like 401(k) and IRA accounts, and are fortunate enough to not need to take large distributions from those accounts in retirement because they have other sources of income, eventually when those individuals reach RMD age (73 or 75), the IRS is going to force them to start taking large taxable distributions out of their pre-tax retirement accounts.

For an individual in this situation, electing NUA can be an attractive option. Instead of their full 401(k) balance ending up in a Rollover IRA with a future RMD requirement, the company stock is sent to a brokerage account that does not require RMDs.

Estate Planning – No Step-Up In Cost Basis for NUA

Here is a little-known estate planning fact about NUA elections.  Normally, when you have unrealized gains in a brokerage account and the owner of the account passes away, the beneficiaries of the estate receive a step-up in cost basis, which eliminates the taxable gain if the beneficiaries were to sell the stock. For individuals that elect NUA from a 401(k) account, there is a special rule that states if shares are deposited into a brokerage account as a result of an NUA election, the remaining portion of the NUA will be considered “income with respect of the decedent”, meaning the beneficiaries of the estate will have to pay long-term capital gains when they eventually sell those shares.

I’m not sure how this is tracked because when you move shares into a brokerage account that has NUA, if the shares continue to appreciate in value, and shares are bought and sold throughout the decedent’s lifetime, how do you determine which portion of the remaining unrealized gain was from the NUA election and which portion represents unrealized gains post NUA?   A wonderful question for your tax professional if you end up in this situation. 

When To Avoid NUA

As part of the analysis above, I highlighted a number of situations where an NUA election might not make sense, but a quick hit list is:

1. Company stock has not performed well in 401(k) account – high cost basis

2. High tax rate assessed on the cost basis amount during the year of NUA election

3. Employee under age 55 or 59½, potentially triggering early withdrawal penalty 

4. Long time horizon to retirement (loss of tax deferred accumulation)

5. Ordinary tax rate lower or similar to long-term capital gains rate

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions (FAQs):

What is NUA and how does it work?
NUA, or Net Unrealized Appreciation, is a special tax rule that allows employees with company stock in their 401(k) to move that stock to a taxable brokerage account after leaving the company. The original cost basis of the stock is taxed as ordinary income, but the stock’s appreciation is later taxed at more favorable long-term capital gains rates instead of ordinary income tax rates.

When can employees use the NUA option?
NUA treatment is available only after separating from an employer due to retirement, termination, or death. It must be elected before rolling over company stock from the 401(k) to an IRA — otherwise, the opportunity is lost permanently.

What are the tax benefits of electing NUA?
The main advantage is that the appreciation in company stock is taxed at long-term capital gains rates (0%, 15%, or 20%) instead of higher ordinary income tax rates. This can lead to significant tax savings when the stock is eventually sold.

What tax event occurs when NUA is elected?
When NUA is processed, the employee must pay ordinary income tax on the stock’s cost basis in the year of distribution. The appreciation amount is not taxed until the stock is sold and is then treated as a long-term capital gain.

When does electing NUA make sense?
NUA is most beneficial when the company stock has a low cost basis and substantial unrealized gains. It can also be a good choice for retirees looking to reduce future required minimum distributions (RMDs) since the company stock moved to a brokerage account is no longer subject to RMDs.

When should NUA be avoided?
NUA may not make sense if the company stock has a high cost basis, the taxpayer is under age 55 (potentially triggering the 10% early withdrawal penalty), or if the individual’s ordinary income tax rate is similar to or lower than the long-term capital gains rate. It may also be less beneficial for those with many years until retirement who would lose the advantage of continued tax-deferred growth.

Does company stock transferred through NUA receive a step-up in basis at death?
No. Company stock distributed under NUA rules does not receive a full step-up in cost basis when the owner passes away. The portion of the gain representing the original NUA remains taxable to heirs as long-term capital gains when the shares are sold.

What’s the biggest mistake employees make with company stock in a 401(k)?
Many employees roll their 401(k) balances directly into an IRA without evaluating whether NUA treatment applies. Once the rollover is complete, the NUA opportunity is lost forever — potentially costing thousands in unnecessary future taxes.