Is Saving $1 million Enough to Retire?

Is $1 million enough to retire? It’s the kind of question everyone wants a simple answer to. Hit $1 million and you’re good. Fall short and you’re behind. Except retirement does not work that way. In this episode of She’s Talkin’ Money, I’m breaking down the factors that actually determine whether $1 million is enough for you — including when you want to retire, how much you expect to spend, where your money is invested, what other income you’ll have, and what “retirement” even means in your life. Because retiring at 55 with $1 million is a very different financial plan than retiring at 67. And $1 million in Roth accounts is not the same as $1 million sitting entirely in pre-tax retirement accounts. We’ll also talk about why your spending may be one of the biggest factors in determining how much you need, how Social Security, pensions, part-time work, consulting and other income can reduce the pressure on your portfolio, and why retiring before age 59½ requires a little more planning around how and when you can access your money. In this episode, you’ll learn: why retirement age changes how long your investments need to support you why where your $1 million is saved matters how your current lifestyle can help estimate retirement spending what the 4% rule can — and cannot — tell you why retirement does not necessarily mean never earning another paycheck how other income sources can reduce the amount you need from investments why carrying less debt into retirement can help when $1 million may actually be enough and when $1 million probably is not enough Instead of starting with an arbitrary retirement number, start with the life you actually want. When do you want to retire? What will it cost? What income will you have? Where will that income come from? Then work backward. That is how you figure out what you actually need for retirement. Learn more about your ad choices. Visit megaphone.fm/adchoices

• 0:01Speaker 00

  This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration blog, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required. Compatibility and availability varies 18 plus.

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• 0:57Speaker 02

  This episode is brought to you by State Farm. Football has a play for just about everything. You can go deep, keep it on the ground, or draw up something nobody sees coming. And whether you want to run a flea flicker or the tush push, you need a plan to fit your unique situation. That's why State Farm takes the time to get to know you so they can help personalize coverage for your life and budget. Now that's a solid game plan. Like a good neighbor, State Farm is there.

• 1:25Speaker 03

  Is $1 million enough to retire? It sounds like such a simple question. And honestly, I understand why people want a simple answer. You hit a million dollars and maybe you think, okay, I did it. I'm good. Or you're nowhere near a million dollars and now you're thinking, well, I guess I'm screwed. But the $1 million by itself tells me almost nothing. Before I can tell you whether a million dollars is enough to retire, I need to know when you want to retire, how much you want to spend, where that $1 million is actually saved, what other income you'll have, and what retirement even means to you. Because retiring at 55 with $1 million

• 2:10Speaker 03

  is a very different financial plan than retiring at 67 with $1 million. So today, we're going to talk about what actually determines whether $1 million is enough and why that number itself is probably the least interesting part of the question.

• 2:34Speaker 03

  Welcome to She's Talkin Money. I'm Shari, financial planner, founder of GWA Wealth. And after 20 years in personal finance, I've seen firsthand how often women are given bad, generic, and one-size-fits-all financial advice. This show is for women who are doing well on paper, but still have questions about what to do next with their money. We're going to talk about investing, taxes, retirement, spending, saving, and the decisions that don't always have one obvious right answer. I'm going to give you honest advice, explain things in a way that actually makes sense, and challenge some of the financial rules you've probably heard your entire life without shaming you for what you've done, what you haven't done, or what you're still figuring out.

• 3:20Speaker 03

  So if you make good money, but want to feel a whole lot clearer about what to do with it, you're in the right place. This is She's Talkin Money. Okay, so we've all seen the headlines. You need to have a million dollars for retirement. Or how much should you have saved for retirement? And it's generic advice, right? It's clickbait. It's trying to get your attention. And a lot of times it works. You may have ended up listening to me right now because you're like, I do want to know if a million dollars is enough to retire. But before I answer that question, I need to know more about your retirement. I hate the generic advice because it's one-size-fits-all and actually it really doesn't fit anyone

• 4:06Speaker 03

  because they know nothing about you. So what I need to know when I'm working with my clients to figure out if assets that they have are enough to fund their retirement, I want to know first, when do you want to retire? So that's a big question. I had a meeting last night with a couple that wants to retire at 57. That's a very different conversation than retiring at 70. Those are 13 more years your investments need to fund your retirement. So a retirement at 57 is not the same as retiring at 70. It requires different assets. Where is the $1 million? Is it in a 401K pre-tax?

• 4:50Speaker 03

  Is it in a Roth 401K after-tax? Is it in a after-tax account, brokerage account? Because that then determines how much of your money you're actually keeping and how much of it is going to taxes. So a million dollars in a Roth is very different than a million dollars in a pre-tax 401K. This is a big one. How much do you spend? What I found with working with my clients is the age at which you want to retire does not have as much of an impact on how much assets you need versus how much are you spending in retirement. Even a thousand-dollar difference a month can make a huge impact on how long your money lasts in retirement

• 5:35Speaker 03

  and then also how much money you need in retirement. So how much you spend in retirement is a biggie. I want to understand what does retirement actually look like to you? Are you completely done working? Are you leaving corporate America, but you want to work somewhere else? You want to consult? You want to work part-time? You want to start a business? You want to buy rental properties and have rental income? What is your retirement going to look like? Are you using the word retirement because it means I'm leaving my career, but I still want to have a job? Or are you like, I'm never working again? I'm never doing anything to earn a paycheck again? That also dramatically impacts how much assets you need. If you are like, no, I'm definitely going to consult

• 6:20Speaker 03

  or I have these opportunities or I want to start a business, that's also going to affect the assets that you have. Starting a business, you may need more money to start the business to eventually create income. If you're going to consult, there may not be as much upfront cost and you can just earn a paycheck from that. But just like how much you spend greatly affects how much assets you need, having other sources of income also greatly affects how much assets you need. Are you one of the lucky few that are going to receive a pension? Social Security. You know, we don't want to depend on Social Security because who knows what it's going to look like. But having a Social Security paycheck come in

• 7:05Speaker 03

  affects how much income you need because that is a chunk of money that will come in that's not from your investments. So the question is not simply, is $1 million enough? The question is, what do you need for your retirement? So let's talk about why the $1 million answer gets everyone's attention. It gives us instant gratification, right? We can read it. We can read the article and have an answer, right? It's immediate. We also want that magic number because money is hard. So if someone just says, nope, you just need this. It's like, okay, great. Now I know what I'm striving for. So it's just like that magic number,

• 7:50Speaker 03

  that magic pill that it's like, it gives us answers in a topic of money that is confusing, overwhelming, has emotion attached to it. It's also, tell me the amount I need and I'll go save it. So I need a million dollars? Okay, I'm going to keep on working hard and saving and sacrificing till I get to that $1 million point. So there's an end point in mind where conversely, a lot of times with saving, it just feels like we're saving and we're never getting to the end. The $1 million answer is certain.

• 8:27Speaker 03

  We can, it's black and white. It also People will say, well, once I hit a million dollars, I'm done. I did my job and that's it. Also, you can, so you can celebrate yourself by going, I hit a million dollars. I'm done. Conversely, you can go, if I don't hit it, I'm behind. Or I'm not on track to hit it. I'm behind. But it's the same problem we talked about with the how much should I have saved by 40 episode? It's incomplete. It's treating everyone the same. It's painting everyone with the same broad brush. We have to look at these numbers like benchmarks. It's a starting point. The one million dollar answer cannot tell you whether your personal plan works.

• 9:10Speaker 03

  It will not tell you if a million dollars is enough for you. It's just saying, is a million dollars enough to retire? So don't let this arbitrary benchmark become the verdict on your retirement. It's just a starting point. It starts the conversation. It gives us something to think about. What's really important when it comes to how much should you have saved is your retirement age. If you retire younger, your money may need to support you for a longer period of time. Retiring at 55 is different than retiring at 67. We have heard of the 59 and a half rule. So if you have retirement accounts, you may not be able to access them prior to 59 and a half

• 9:54Speaker 03

  without paying a 10% penalty. So if all of your money is in retirement and you'd like to leave the corporate world at 55, you're going to have an issue between 55 and 59 and a half because you potentially may not be able to access your retirement money without paying a 10% penalty. That's a problem. In general, distributions from retirement plans and traditional IRAs before 59 and a half can be subject to an additional 10% tax unless there's an exception. So that does not mean you simply cannot retire before 59 and a half. It means the account types you have matter.

• 10:35Speaker 03

  If you separate from an employer in or after the year you turn 55, distributions from that employer's qualified plan can qualify for an exception to the additional 10% tax. But that exception generally does not apply to IRAs. There's also substantially equal periodic payment rules that allow certain early distributions without the 10% tax. But those rules come with requirements and restrictions that a lot of people may not like. Roth IRA contributions are also treated differently from earnings. Roth IRA ordering rules treat regular contributions as coming out first.

• 11:18Speaker 03

  So you could have access to your Roth contributions potentially without any penalties. So when someone tells me she wants to retire at 55, one of my first questions is, where is your money? Where is your money invested? A million dollars spread across Roth taxable investments, cash and 401k can give you very different flexibility than one million dollars entirely inside in a traditional IRA. That's where planning comes into play. So that's where just looking at the one million dollar answer is not good enough because we need to look at where is that money? Where is it invested right now?

• 12:00Speaker 03

  Retiring younger means you have more years that your investments are going to have to pay you for, which potentially means you need to have more money saved. You may also have fewer guaranteed income sources available at the beginning. Full retirement age for a lot of people is 67 and a handful of months. So if we're retiring at 55, what are we going to do for those 12 years before social security kicks in? So there's a lot to factor in when it comes to retiring younger. It doesn't mean you cannot retire young. But again, as I mentioned before, the retiring at 59 and a half just requires more planning.

• 12:43Speaker 03

  So if you tell me you have a million dollars saved, I want to know what type of dollars they are. A million dollars in a Roth is not economically equivalent to a million dollars in a traditional pre-tax IRA or 401k. Qualified Roth withdrawals can generally be tax-free, which means if you need $5,000 a month from your Roth, you withdraw $5,000. From your traditional IRA, you need to withdraw like $7,000 in order to net out that $5,000 needed in income. So you're withdrawing more from your traditional pre-tax accounts in order to net out the same amount.

• 13:25Speaker 03

  So when you're withdrawing more, that increases the chance of your account not lasting as long as you do. So we cannot look at two one million dollar balances that are in a Roth IRA and a traditional IRA, for example, and pretend they are identical. Taxes affect how much of the money is actually available for your lifestyle. So now let's talk about how much you spend. And this may be the most important part. You cannot know how much you need until you understand what retirement is actually going to cost you. So when clients come to me and say, tell me how much I need to have saved for my retirement,

• 14:07Speaker 03

  I then respond with a question of, well, how much do you spend? If you spend $50,000 a year, that creates one type of retirement plan. If you spend $150,000 a year, that creates a completely different retirement plan with a different amount needed to have saved. The more you spend, the more assets or outside income you need. Your lifestyle is your lifestyle. So is there wiggle room there? I'm not quite sure. But I would be surprised if someone spending $100,000 a year today suddenly plans to happily live on $25,000 or $50,000 a year in retirement.

• 14:50Speaker 03

  Some expenses absolutely do change. You may be going through an expensive season of life right now. Maybe your mortgage disappears. When you are in retirement, you're no longer saving. So if right now a large portion of your income goes to saving, that part stops. So then it's less income that you need. You may, your commuting costs may go away. Your children may be financially independent by the time you retire. But we need to figure that stuff out. But you cannot just assume your lifestyle gets dramatically cheaper because you stopped working. That is a mistake a lot of people make is that they think they're going to need a fraction of income in retirement.

• 15:34Speaker 03

  And I can tell you from experience, that is, that is not the case. If a, if 45 year old comes to me and wants to know how much money do I need to retire?

• 15:47Speaker 03

  I'm not going to be having that conversation yet because I don't want you obsessing over that number where it's a little too soon. A lot can happen between 45 and retirement. Your income can change, your spending can change, your family can change, your retirement goals can change. At 45, I am much more interested in reducing unnecessary debt, saving consistently, investing as much as you reasonably can, building liquidity, increasing savings when your income increases. And then when you get closer to retirement, in your mid 50s, your lifestyle and your expenses become much more concrete.

• 16:29Speaker 03

  And that is when I want to start getting much more specific about what retirement is actually going to cost. When you're in your mid 40s, I just want you focused on saving. I don't want you to be worried about hitting this benchmark of a number that may or may not be relevant to you. Just control what you can control, do the best that you absolutely can. And, and that's it. That's all I can ask for. And then when retirement really starts to become in the horizon, that's when we can have these more concrete conversations.

• 17:05Speaker 00

  This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration blog, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required. Compatibility and availability varies 18 plus.

• 17:31Speaker 03

  So what does retire mean to you? And I ask every single client this question when we start to talk about retirement, because one person's retirement is not the same as someone else's. And I do not want to make any assumptions. This is a huge distinction, and this really helps to determine how much assets do I really need? Retirement does not always mean I'm going to stop earning money forever. Retirement may mean I leave corporate America. I take a lower-stress job. I consult. I work part-time. I teach. I start a business. I work because I want to, not because I need the paycheck. If you plan to earn income after leaving your current career, that reduces how much

• 18:15Speaker 03

  pressure your investment portfolio has to carry. Even a relatively modest amount of earned income can change how much you need to withdraw from investments each year. Even if you take, say you retire before 65 Medicare age, and you take a job just for, a part-time job just for benefits. So you're really not earning that much money. Most of your money that you earn goes right back to paying the benefits. That is huge. That takes so much pressure off because you're not paying for COBRA or using the marketplace for insurance. So factoring that stuff in is super important. So sometimes working is not just about the paycheck.

• 18:57Speaker 03

  It's, working could just be to relieve financial pressure, which in this case is to help with benefits, making sure that you have health insurance.

• 19:08Speaker 03

  Other income matters a lot. Think of your retirement income like a puzzle. We're solving for the amount you're spending, and then we put all of these pieces together to solve for that amount you're spending. So pension income reduces what your investments need to provide. So you add up everything that's coming into you automatically. Pension, social security, annuity, rental income, part-time work, consulting income. And then you add all of that up, and your investments are what solves for the difference. So all of these little things that you can do, all of these little paychecks that you can get, help to relieve the pressure from your investments, help to make that investment slice of the pie smaller.

• 19:51Speaker 03

  So don't just look at your investment account in isolation. We're building your total retirement income picture. So you may hear of the 4% rule. And I think the 4% rule is at least more useful than simply saying you need $1 million. So here's a rough illustration. Four, so you take 4% of whatever your assets are, and that's how much you can reasonably expect to withdraw each year from your account. Like, that's a sustainable withdrawal amount. So 4% of $1 million is $40,000. So if you started with a $1 million portfolio and you used a 4% starting withdrawal framework,

• 20:33Speaker 03

  you are taking roughly 40 grand from this portfolio in the first year before taxes and your other income sources. So is $40,000 enough for your lifestyle? Are we adding social security on top of it? Well, if you're retiring pre-social security age, is $40,000 enough? Are there other things you can add on top of that $40,000 to make that a little bit more palatable?

• 20:58Speaker 03

  So that's a way, that's a starting point. So then you're like, uh, no, $1 million is not enough at all if we're thinking about the 4% rule. Well, okay. Again, that's why we shouldn't just follow the headlines of you need $1 million for retirement. I don't need you to treat 4% like a guarantee. It's just another tool. It doesn't know your taxes. It doesn't know your health or your health insurance. It doesn't know your spending. It doesn't know your investment allocation. It doesn't know whether your retirement is going to be 20 years or 40 years. But we're using it as a frame of reference. Okay? This is just, again, a starting point. It's part of the conversation. So I don't know about you, but when a friend recommends a podcast to me, I'm way more likely to actually go listen to it.

• 21:44Speaker 03

  So if someone is coming to mind while you're listening to this, maybe she's asking herself whether she has enough to retire. Text her this episode. That's one of the easiest ways to help more women find She's Talkin Money. And also, I'd really, really appreciate it. Okay. So debt also changes how much income you need. The fewer required bills you carry into retirement, the less income you need every month. Going into retirement with less debt can be incredibly helpful. But I also don't want you spending your entire working life aggressively eliminating debt if that means you're neglecting investing and saving. You need both sides of the balance sheet working for you.

• 22:26Speaker 03

  If you get to retirement with no mortgage, but not enough investments to fund your lifestyle, we have not solved the problem. Debt reduction needs to support the retirement plan, not replace it. So when is $1 million potentially enough to retire on? It could be enough if you really don't spend that much. You're not really planning on traveling the world in retirement. You just want to chill. You have relatively low fixed expenses. You have little debt. You have social security coming to you. You have potentially pension income or annuity income. You plan to work part-time or consult. Your retirement accounts are diversified across different tax treatments.

• 23:07Speaker 03

  You have access to money that is not subject to the 10% penalty if you plan on taking withdrawals prior to 59 and 1/2. $1 million may be enough if your retirement lifestyle simply does not require a massive amount of annual income.

• 23:25Speaker 03

  When, when is $1 million probably not enough if you want to retire very young? If you are a spender, you like to spend, travel, you have high fixed expenses, you have significant debt, you expect your investment portfolio to provide almost all of your income, you do not plan to work at all in retirement. Once you're retired, you are done earning a paycheck. You have substantial healthcare costs to fund before Medicare. Most of your assets are difficult or expensive to access at the age you want to retire, meaning you're potentially paying penalties and taxes. The retirement lifestyle you are picturing requires significantly more annual income than the portfolio can reasonably support.

• 24:10Speaker 03

  So what I want you to do instead is work backwards. Instead, stop starting with, how much should I have? And instead, start with, when do I want to retire? What does retirement mean to me? How much will I realistically spend? What income will I have besides investments? Where are my investments held? What taxes will I owe? What debt will I still have? What does healthcare look like? Then work backwards. That tells us what you need to build, not some arbitrary headline number. And this is exactly why retirement planning is more than hitting an account balance. If you're doing well financially, but you want help figuring out what retirement actually

• 24:51Speaker 03

  looks like for you, what you need when you can retire, and how all of your accounts fit together, you can learn more about working with me at gwawealth.com. GWA Wealth is a registered investment advisor. This content is educational and not individualized advice. So is $1 million enough to retire? Maybe. For one person, it could be more than enough. For someone else, it may not be close. The question is not whether $1 million is enough. The question is, what do you need for your retirement? What does your life cost? When do you want to stop working? What does retired even mean to you? What other income will you have? Where is your money saved?

• 25:32Speaker 03

  Do not get so focused on arbitrary benchmarks that you forget what the money is actually supposed to do. Figure out the retirement you want first, then work backwards and build the financial plan to pay for it. Thanks for joining me on She's Talkin Money. I'll see you next week.

• 25:59Speaker 01

  They're running a cover two defense. But you're running to get game day deals on Uber Eats. Keep everyone at tonight's watch party fed with deals from your go-to restaurants. Or stock up with deals on your favorite snacks and groceries. Whatever the occasion, get game day deals on Uber Eats all season long. It's not football without food. Uber Eats, order now. Terms apply. Product availability varies by region. See app for details.

• 26:30Speaker 01

  This episode is brought to you by State Farm. Football has a play for just about everything. You can go deep, keep it on the ground, or draw up something nobody sees coming. And whether you want to run a flea flicker or the tush push, you need a plan to fit your unique situation. That's why State Farm takes the time to get to know you, so they can help personalize coverage for your life and budget. Now that's a solid game plan. Like a good neighbor, State Farm is there.