$1 Million Isn't Enough for a Worry-Free Retirement Anymore

Savings, close up of male hand stacking golden coins over sky background
How much money do you need to save to retire -- to have your expenses covered, be free from worry and have a little extra to do the things you always swore you'd do? It depends on whom you ask.

Fidelity Investments recommends putting aside eight times your final annual salary, but admits several variables could change that math. Plus, how can you estimate today what your salary will be at the end of your career? That's not super-helpful advice when you're 25 and wondering how much you should save.

Other experts recommend aiming for $1 million in retirement savings. That might sound like a lot, but it's not. Consider the popular "4 percent rule" -- which suggests that 4 percent is a safe amount to withdraw from your retirement savings each year. Safe, in this case, means the odds are good that your money will last as long as you do -- since the last thing you want is to wind up retired and broke. But follow that safe and conservative withdrawal plan, and $1 million in retirement savings will only give you about $40,000 a year to live off.

You may think $40,000 sounds like enough, given that your house will (hopefully) be fully paid off when you stop working. But you'll also need to factor the added expenses that come with aging, like additional medical expenses, caring for elderly parents, and at some point, long-term care for yourself.

If you're looking to live a comfortable, worry-free retirement, I recommend aiming to put aside the equivalent of $1.5 million to $2 million in today's dollars.

What You Can Get for $2 Million

For the sake of simplicity, we'll talk in today's dollars (so there's no confusion about inflation). Let's pretend you're retiring today. According to the 4 percent rule, $2 million would give you $80,000 a year. Will that be enough to maintain your standard of living?

To get a better idea, ask yourself how much you currently spend. Remember you won't have commuting costs and your mortgage will be paid off. However, new expenses will emerge:
  • New health care costs, including the infamous "doughnut hole" (a gap in Medicare Part D prescription drug coverage).
  • Care for aging parents and sick relatives.
  • Support of any adult children still living in your basement, mooching off your utilities and groceries.
  • Tuition for your children's college or grad school education.
  • Your children's weddings.
  • Education trusts for your grandkids.
  • Paying someone to do tasks you were once able to do yourself, such as lawn care, household repairs and upkeep. When you're 70, you probably won't want to be cleaning gutters, scrubbing baseboards or repairing your own leaky plumbing.
Other Sources of Income

Bear in mind that this conversation focuses only on the money from your 401(k), Individual Retirement Account and other portfolio investments.

You'll also have Social Security payments (estimate your retirement benefits) and maybe a pension (if you're one of the lucky few whose company still provides one). Take a minute and consider any other revenue streams you'll be able to tap. Advertising revenue from your world-famous YouTube cat video? (Just kidding!) Realistically, maybe you can become a part-time entrepreneur. Or perhaps you could bring in an extra $200 a week teaching a musical instrument or tutoring high school students.

Add it all up, and you may find your annual retirement "salary" has gone up. Compare this number to your estimated retirement expenses. You can get a clearer idea of just how much you need to set aside to live comfortably.

In the End

Sad, but true: Simply being a millionaire is no longer enough to guarantee a happy, secure retirement. Aim to be a double-millionaire instead, and you can trade the prospect of Ramen dinners for visions of golf or travel. (Or golfing at St. Andrews, if you combine the two.)

Paula Pant ditched her 9-to-5 job in 2008. She's traveled to 30 countries, owns six rental units and runs a business from her laptop. Her blog, Afford Anything, is a gathering spot for rebels who refuse to say, "I can't afford it." Visit Afford Anything to learn how to shatter limits, quit your job and live life on your own terms.

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Thomas Rockford

One million can go along way in retirement... maybe not in NYC or LA, but definitely in most parts of the US. As with any other financial issue, the key is to spend less than you make.
If you start to run out of cash during retirement, just start living below your means for a while... (but of course that's easier said than done.) Here are some of my tips:
1) Start by selling everything you don't need (ebay, yard sales, etc.). You probably have a bunch of antiques or collectibles that you could sell for big money.
2) Cut eating out as much as possible.. aim for eating on less than $2/day (definitely possible) especially as caloric requirements decrease as you age.
3) Cut back on transportation costs. Drive a cheap car (Honda Civic), get cheap $25/month insurance (check out Insurance Panda,​ they are the cheapest), use GasBuddy for gas.
4) Don't bite off more than you can chew with rent/mortgage/assist​​ed living or whatever house cost you have. Hopefully it's already paid off...
5) Get whole life insurance if you don't have it. Life Ant is great for cheap whole policies with good benefits. ($50/month with $1 million in benefits). Will be great to protect your loved ones when you pass. Also, you can earn dividends from it.
6) Put away as much money possible when you can. Get pleasure from putting money into your bank account rather than putting money into a flatscreen TV or a vacation.

April 22 2014 at 6:30 PM Report abuse rate up rate down Reply

how can the average joe ever save that much. For most of my life I worked for small companies (retail stores) who did not offer subsidized insurance packages. About 50% of my take home pay went to health insurance. I'm screwed

April 14 2014 at 9:56 PM Report abuse rate up rate down Reply

She never considered any income the investments make. I guess all $2M is in a checking account. This author does not have a payer of acquiring $2M on her own. My dad, age 83, just replaced his water heater, shovels the drive by hand, cleans the gutters, etc. At 70 he was doing anything he could do at age 20 (maybe a little slower). Got to agree, $1M is may be tight if trying to retire early, with no pension, health care, etc.

April 10 2014 at 9:28 PM Report abuse rate up rate down Reply
1 reply to vlady1000's comment

That's right. And why do they figure that at age 70, you are over the hill and can't do anything for yourself?

April 11 2014 at 7:55 PM Report abuse rate up rate down Reply

One hundred senators, 435 congressmen, one president and nine Supreme Court justices - 545 human beings out of the 316 million - are directly, legally, morally and individually responsible for the domestic problems that plague this country.
and we re-elect 90% of them when they have a 5% approval rating...why? and we pay them six figures and benefits for life...why??????

April 10 2014 at 9:58 AM Report abuse rate up rate down Reply

your best option is to time travel back to 1960 and join the civil service

April 10 2014 at 3:20 AM Report abuse rate up rate down Reply

If you are on social security and medicare THANK A DEMOCRAT. If you want to end these 2 fine programs vote republican.

April 10 2014 at 2:56 AM Report abuse -1 rate up rate down Reply

I am not exactly sure where the author has been living but I don't know any retiree within the people I know or the neighbor I live in that have anywhere close to a million dollars saved for retirement. Most of us receive a small pension and Social Security and have a small amount of savings and that is it. I think the author of this article must live in dream land. I saved money I also had a home once but during the down turn between 2007 and 2010 because I was transfered by my company I tried to sell my house which was in Las Vegas NV needless to say the bottom fell out of the market and I had to let the home go because I could not pay the mortgage in Nevada and rent in Ohio. My investments became worthless paper after the Wall street greed I was 60 yrs old at he time, then the employer that transfered me from Nevada to Ohio decided in 2008 two days after I turned 62 that I was no longer needed after 42 years and they let me go.Within the 42 year time frame I paid off two houses and assisted 3 children in college, so basically this is where all the hard work went. As far as I am concerned anyone that has a million dollars to retire on has done nothing for anyone but themselves.Besides Jesus said to his Apostles " It will be easier for a camel to pass through the eye of a needle than for a rich man to enter the Gates of Heaven"

April 10 2014 at 1:58 AM Report abuse +1 rate up rate down Reply

If you want any future at all, vote Republican.

April 09 2014 at 10:40 PM Report abuse -5 rate up rate down Reply
2 replies to crimeslawyer's comment

If you are a 1%er. If your the middle class and vote Republican you need your head examined.

April 10 2014 at 12:47 AM Report abuse +4 rate up rate down Reply

When the dollar collapses, and it will. Then inflation could go up one hunred or hundreds percentage points.

Russia announced they would buy with rubles, Iranian oil and the Iranians agreed. China is doing business with Japan in the Yuan.

Qualitative easement meant that fosur banks, that were two big to fail, go four trillion dollars in new money. We, the people, are too small to succeed in the eyes of DC and its hubris.

Imposing sanctions on other countries, or US imperialism, means and has meant that these countries, the BRIC countries are abandoning the dollar as the reserve currency as well.

The manipulation of Gold by the banks, short traders and the fed has meant the Fed cannot even return Germany's gold for they do not have it!

Once the dollar is abandoned by half the world population, it will buy little.

So, better have billions when you retire for if not retirement will mean "buying the box".

April 09 2014 at 9:21 PM Report abuse rate up rate down Reply
Bob Smith

I'll bet dimes to donuts, our Militiaman never served a day in his life...it's also obvious he has never had an original thought either.
This article goes along with the "Don't Retire early" propaganda. SMH..

April 09 2014 at 9:16 PM Report abuse rate up rate down Reply
3 replies to Bob Smith's comment