If You Retire With $1 Million, How Long Will It Last?
Is $1 million enough to retire? The answer depends on withdrawal rates, inflation, investment returns, and taxes. This article walks through different scenarios to show how long $1 million can last and what retirees should consider in their planning.
By Michael Ruger, CFP®
Partner and Chief Investment Officer at Greenbush Financial Group
Retirement planning often circles around one big question: If I save $1 million, how long will it last once I stop working? The answer isn’t one-size-fits-all. It depends on a handful of key factors, including:
Your annual withdrawal rate
Inflation (the rising cost of goods and services over time)
Your assumed investment rate of return
Taxes (especially if most of your money is in pre-tax retirement accounts)
In this article, we’ll walk through each of these factors and then run the numbers on a few different scenarios. By the end, you’ll have a much clearer idea of how far $1 million can take you in retirement.
Step 1: Determining Your Withdrawal Rate
Your withdrawal rate is simply the amount of money you’ll need to take from your retirement accounts each year to cover living expenses. Everyone’s number looks different:
Some retirees might only need $60,000 per year after tax.
Others might need $90,000 per year after tax.
The key is to determine your annual expenses first. Then consider:
Other income sources (Social Security, pensions, part-time work, rental income, etc.)
Tax impact (if pulling from pre-tax accounts, you’ll need to withdraw more than your net spending need to cover taxes).
For example, if you need $70,000 in after-tax spending money, you might need to withdraw closer to $75,000–$90,000 per year from your 401(k) or IRA to account for taxes.
Step 2: Don’t Forget About Inflation
Inflation is the silent eroder of retirement plans. Even if you’re comfortable living on $70,000 today, that number won’t stay static. If we assume a 3% inflation rate, here’s how that changes over time:
At age 65: $70,000
At age 80: $109,000
At age 90: $147,000
Expenses like healthcare, insurance, and groceries tend to rise faster than other categories, so it’s critical to build inflation adjustments into your plan.
Step 3: The Assumed Rate of Return
Once you retire, you move from accumulation mode (saving and investing) to distribution mode (spending down your assets). This shift raises important questions about asset allocation.
During accumulation years, you weren’t withdrawing, so market dips didn’t permanently hurt your portfolio.
In retirement, selling investments during downturns locks in losses, making it harder for your account to recover.
That’s why most retirees take at least one or two “step-downs” in portfolio risk when they stop working.
For most clients, a reasonable retirement assumption is 4%–6% annual returns, depending on risk tolerance.
Step 4: The Impact of Taxes
Taxes can make a significant difference in how long your retirement savings last.
If most of your money is in pre-tax accounts (401k, traditional IRA), you’ll need to gross up withdrawals to cover taxes.
Example: If you need $80,000 after tax, and your tax bill is $10,000, you’ll really need to withdraw $90,000 from your retirement accounts.
Now, if you have Social Security income or other sources, that reduces how much you need to pull from your investments.
Example:
Annual after-tax expenses: $80,000
Grossed-up for taxes: $90,000
Social Security provides: $30,000
Net needed from retirement accounts: $60,000 (indexed annually for inflation)
Scenarios: How Long Does $1 Million Last?
Now let’s put the numbers into action. Below are four scenarios that show how long a $1 million retirement portfolio lasts under different withdrawal rates. Each assumes:
Retirement age: 65
Beginning balance: $1,000,000
Inflation: 3% annually
Investment return: 5% annually
Scenario 1: Withdrawal Rate $40,000 Per Year
Assumptions:
Annual withdrawal: $40,000 (indexed for 3% inflation)
Rate of return: 5%
Result: Portfolio lasts 36 years (until age 100).
Why not forever? Because inflation steadily raises the withdrawal amount. At age 80, withdrawals rise to $62,000/year. By age 90, they reach $83,000/year.
Math Note: For the duration math, while age 90 minus age 65 would be 35 years. We are also counting the first year age 65 all the way through age 90, which is technically 36 years. (Same for all scenarios below)
Scenario 2: Withdrawal Rate $50,000 Per Year
Assumptions:
Annual withdrawal: $50,000 (indexed for 3% inflation)
Rate of return: 5%
Result: Portfolio lasts 26 years (until age 90).
By age 80, withdrawals grow to $77,000/year. By age 90, they reach $104,000/year.
Scenario 3: Withdrawal Rate $60,000 Per Year
Assumptions:
Annual withdrawal: $60,000 (indexed for 3% inflation)
Rate of return: 5%
Result: Portfolio lasts 21 years (until age 85).
Scenario 4: Withdrawal Rate $80,000 Per Year
Assumptions:
Annual withdrawal: $80,000 (indexed for 3% inflation)
Rate of return: 5%
Result: Portfolio lasts 15 years (until age 79).
Even if you bump the return to 6%, it only extends one more year to age 80. Higher withdrawals create a significant risk of outliving your money.
Final Thoughts
If you retire with $1 million, the answer to “How long will it last?” depends heavily on your withdrawal rate, inflation, taxes, and investment returns. A $40,000 withdrawal rate can potentially last through age 100, while a more aggressive $80,000 withdrawal rate may deplete funds before age 80.
The bottom line: Everyone’s situation is unique. Your lifestyle, income sources, tax situation, and risk tolerance will shape your plan. This is why working with a financial advisor is so important — to stress-test your retirement under different scenarios and give you peace of mind that your money will last as long as you do.
For more information on our fee based financial planning services to run your custom retirement projections, please visit our website.
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 a safe withdrawal rate in retirement?
A commonly used guideline is the 4% rule, meaning you withdraw 4% of your starting balance each year, adjusted for inflation. However, personal factors—such as market performance, expenses, and longevity—should guide your specific rate.
How does inflation affect retirement spending?
Inflation steadily increases the cost of living, which raises how much you need to withdraw each year. At a 3% inflation rate, an annual $70,000 expense today could grow to over $100,000 within 15 years, reducing how long savings can last.
Why do investment returns matter so much in retirement?
Once you start taking withdrawals, poor market performance can have a lasting impact because you’re selling investments during downturns.
How do taxes impact retirement withdrawals?
Withdrawals from pre-tax accounts like traditional IRAs and 401(k)s are taxable, so you may need to take out more than your net spending needs. For instance, needing $80,000 after tax could require withdrawing around $90,000 or more before tax.
What can help make retirement savings last longer?
Strategies like moderating withdrawal rates, maintaining some stock exposure for growth, and factoring in Social Security or pension income can extend portfolio longevity. Regularly reviewing your plan helps ensure it stays aligned with your goals and spending needs.
The Risk of Outliving Your Retirement Savings
Living longer is a blessing, but it also means your savings must stretch further. Rising costs, inflation, and healthcare expenses can quietly erode your nest egg. This article explains how to stress-test your retirement plan to ensure your money lasts as long as you do.
By Michael Ruger, CFP®
Partner and Chief Investment Officer at Greenbush Financial Group
When you imagine retirement, perhaps you see time with family, travel, golf, and more time for your hobbies. What many don’t realize is how two forces—longer lifespans and rising costs—can quietly erode your nest egg while you're still enjoying those moments. Living longer is a blessing, but it means your savings must stretch further. And inflation, especially for healthcare and long-term care, can quietly chip away at your financial comfort over the years. Let’s explore how these factors shape your retirement picture—and what you can do about it.
What you’ll learn in this article:
How life expectancy is evolving, and how it’s increasing the need for more retirement savings
The impact of inflation on a retiree's expenses over the long term
How inflation on specific items like healthcare and long-term care are running at much higher rates than the general rate of inflation
How retirees can test their retirement projections to ensure that they are properly accounting for inflation and life expectancy
How pensions can be both a blessing and a curse
1. Living Longer: A Good But Bad Thing
The Social Security life tables estimate that a 65-year-old male in 2025 is expected to live another 21.6 years (reaching about age 86.6), while a 65-year-old female can expect about 24.1 more years, extending to around 89.1 (ssa.gov).
That has consequences:
If a retiree spends $60,000 per year, a male might need 21.6 × $60,000 = $1,296,000 in total
A female might need 24.1 × $60,000 = $1,446,000
These totals—before considering inflation—highlight how long-term retirement can quickly become a multi-million-dollar endeavor.
2. Inflation: The Silent Retirement Thief
Inflation steadily erodes the real value of money. Over the past 20 years, average annual inflation has held near 3%. Let’s model how inflation reshapes $60,000 in annual after-tax expenses for a 65 year-old retiree over time with a 3% annual increase:
At age 80 (15 years after retirement):
$60,000 × (1.03)^15 ≈ $93,068 per yearAt age 90 (25 years after retirement):
$60,000 × (1.03)^25 ≈ $127,278 per year
In just the first 15 years, this retiree’s annual expenses increased by $33,068 per year, a 55% increase.
3. The Hidden Risk of Relying Too Much on Pensions
One of the most common places retirees feel this pinch is with pensions. Most pensions provide a fixed monthly amount that does not rise meaningfully with inflation. That can create a false sense of security in the early years of retirement.
Example:
A married couple has after-tax expenses of 70,000 per year.
They receive $50,000 from pensions and $30,000 from Social Security.
At retirement, their $80,000 of income in enough to meet their $70,000 in after-tax annual expenses.
Here’s the problem:
The $50,000 pension payment will not increase.
Their expenses, however, will rise with inflation. After 15 years at 3% inflation, those same expenses could total about $109,000 per year.
By then, their combined pension and Social Security will fall well short, forcing them to dip heavily into savings—or cut back their lifestyle.
This illustrates why failing to account for inflation often means retirees “feel fine” at first, only to face an unexpected shortfall 10–15 years later.
4. Healthcare & Long-term Care Expenses
While the general rise in expenses by 3% per year would seem challenging enough, there are two categories of expenses that have been rising by much more than 3% per year for the past decade: healthcare and long-term care. Since healthcare often becomes a large expense for individuals 65 year of age and older, it’s created additional pressure on the retirement funding gap.
Prescription drugs shot up nearly 40% over the past decade, outpacing overall inflation (~32.5%) (nypost.com).
Overall healthcare spending jumped 7.5% from 2022 to 2023, reaching $4.9 trillion—well above historical averages (healthsystemtracker.org).
In-home long-term care is also hefty—median rates for a home health aide have skyrocketed, with 24-hour care nearing $290,000 annually in some cases (wsj.com).
5. The Solution: Projections That Embrace Uncertainty
When retirement may stretch 20+ years, and inflation isn’t uniform across expense categories, guessing leads to risk. A projection-driven strategy helps you:
Model life expectancy: living until age 85 – 95 (depending on family longevity)
Incorporate general inflation (3%) on your expenses within your retirement projections
Determine if you have enough assets to retire comfortably
Whether your plan shows a wide cushion or flags a potential shortfall, you’ll make confident decisions—about savings, investments, expense reduction, or part-time work—instead of crossing your fingers.
6. Working with a Fee-Based Financial Planner Can Help
Here’s the bottom line: Living longer is wonderful, but it demands more planning in the retirement years as inflation, taxes, life expectancy, and long-term care risks continue to create larger funding gaps for retirees.
A fee-based financial planner can help you run personalized retirement projections, taking these variables into account—so you retire with confidence. And if the real world turns out kinder than your model, that's a bonus. If you would like to learn more about our fee-based retirement planning services, please feel free to visit our website at: Greenbush Financial Group – Financial Planning.
Learn more about our financial planning services here.
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)
How does longer life expectancy affect retirement planning?
People are living well into their 80s and 90s, meaning retirement savings must cover 20–30 years or more. The longer you live, the more years your portfolio must fund, increasing the importance of conservative withdrawal rates and sustainable planning.
Why is inflation such a big risk for retirees?
Inflation steadily raises the cost of living, reducing the purchasing power of fixed income sources like pensions. Even at a modest 3% inflation rate, living expenses can rise more than 50% over 15 years, requiring larger withdrawals from savings.
How does inflation impact pensions and fixed income sources?
Most pensions don’t increase with inflation, so their purchasing power declines over time. A pension that comfortably covers expenses at retirement may fall short within 10–15 years as costs rise, forcing retirees to draw more from savings.
Why are healthcare and long-term care costs such a concern in retirement?
Healthcare and long-term care expenses have been increasing faster than general inflation. Costs for prescriptions, medical services, and in-home care can grow at 5–7% annually, putting additional strain on retirement savings.
How can retirees plan for inflation and longevity risk?
Running detailed retirement projections that factor in inflation, longer life expectancy, and varying rates of return helps reveal whether savings are sufficient. This approach allows retirees to make informed decisions about spending, investing, and lifestyle adjustments.
When should retirees work with a financial planner?
Consulting a fee-based financial planner early in the retirement planning process can help test different inflation and longevity scenarios. A planner can build customized projections and ensure your plan remains flexible as costs and life circumstances evolve.
