# Is \$1,000,000 a lot of money in retirement? You decide

Let’s say when you retire in 2018 you are earning \$50,000 and through prudent saving and investing you have accumulated \$1,000,000 in retirement savings.

Using the SSA quick calculator we find that a couple will receive \$26,100 in benefits at normal retirement age.

Then using a 4% withdrawal rate from retirement assets (you’ll have to take, but not necessarily use, the required minimum distribution (RMD), we add \$40,000 for a total income of \$66,100 – more than pre-retirement income.

It appears \$1 million can be a lot of money and for many people provide a nice retirement. Image if your expenses in retirement actually do decline. 😃

1. Atossa says:

I was able to comfortably retire early at age 55 on HALF a million. But I am single, totally debt free and live in a less expensive part of the country [Dallas area.] In the 11 years I have been retired, my [conservatively invested] savings have continued to grow, so I am on my way to make it to a million after retirement.

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2. Dwayne says:

I look at a million dollars as being the bare minimum amount but as you stated it is all from your point of view. Making 6 figures while working is different than making \$50k. Earning \$50k a year and saving enough may look impossible and might be with a family. Somebody needs to make an online calculator that will give a savings rate target not a saving rate amount. The savings rate would give you enough that when your retirement savings is withdrawn and is added to social security your income will equal exactly what you are earning while working. Of course the more you earn the more you need to save since social security benefits are capped.

I made a very simple excel spreadsheet (I know the real calculations are more involved but I don’t know the formulas). If a person makes \$50k a year with no raises and works from age 20 to age 65 saving 7% in a private IRA getting a 7% ROR he will have a million dollars. But I do not think a family man making \$50k could save 7%, that’s \$3,500 a year nor will he start out at \$50k/yr at age 20. But if he managed to save 4% (\$2,000 a year) with a 7% ROR for 45 years, he would have over \$600k. The 4% drawdown would be over \$24K. Add the \$24k to social security of \$26,100 and they have total income replacement of about \$50K. Bingo, a little more realistic goal.

I think that with the capability of the Internet, that such a calculator which could calculate how much you need to save at any given age to have totally equal income in retirement (social security + your drawdown) would be a great tool. I bet some people just get discouraged when they hear that they need a million dollars. They know that they cannot save that much money. \$2k might be a stretch even for a young family man. Saving 10% or \$5k a year is probably impossible and would just make a person not even try. But saving 2% or 4% might offer hope and get people started sooner instead of giving up because of an impossible amount. Later in life the calculator can be used to adjust your saving rate to make up for the early years or an increase in income. After all the retirement goal should be to maintain the same standard of living.

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