Can I retire comfortably with $1.5 million?

To determine if $1.5 million is enough for retirement, you’ll need to consider Social Security, pension and other income, as well as fixed and variable costs. For example, your lifestyle and how long you’ll live in retirement have a big impact. Let’s take a look at these and other factors to help you determine if you can retire comfortably on $1.5 million.

A Financial Advisor can help you create a financial plan for your retirement needs and goals.

Factors to consider

It’s not easy to know if $1.5 million is enough to retire comfortably, in part because there are so many factors at play. Here are four common factors to consider:

Social Security. The average monthly Social Security payment is $1,551.66 per month as of November 2022. That works out to $18,619.92 per year in monthly benefits. While living on that amount alone can be difficult, it could be a nice addition if you already have retirement savings. The Social Security Administration (SSA) generally provides a cost-of-living increase (COLA) every year, which adjusts the Social Security Payments due to inflation. Therefore, these payments should continue to be a good supplement to Social Security even as costs rise.

Pensions. According to the US Census, the median amount of pensions and retirement income was $8,538 in 2017. Note that this amount does not separate pensions and retirement income, however. Pensions are increasingly rare in the private sector, but they can also give you a nice boost to your retirement. Jobs that may still provide pensions include state and local government jobs, teaching jobs, and jobs in finance.

Total retirement income. In 2021, the total income for those 65 and older was $47,620, according to the US Census. In addition to Social Security and pensions, the Census also considers income, supplemental Social Security income, property income, and other income. As mentioned above, the Census combined retirement income with pension income, which totaled almost $8,500. However, that means the median household income, not including pension or retirement income, is $39,082. Not many people earn a pension these days, so that figure captures what the average household earns in addition to retirement income.

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The 4% rule. A commonly cited rule of thumb in the personal finance community is the 4% rule. With this rule, you can safely withdraw 4% of your investment portfolio each year. If you have a portfolio of $1.5 million, that amount equals $60,000. If your portfolio still has a stock allocation, it can continue to grow even when you retire. One study found that most portfolios would last 30 years under this rule, or as long as 50 years in some cases. If you add this to the average Social Security income plus the supplemental Social Security income, you would have an income of $76,840 per year. That doesn’t include property income, earnings or pensions.

How much do retirees usually spend?

The average annual total spending for people ages 65-74 in May 2014 was $48,885, according to the Bureau of Labor Statistics. Adjusted for inflation, that works out to $61,175. But his retirement would still be financially secure even without earnings or property income. Of course, there are many caveats, even if Social Security payments will be consistent. For now though, $1.5 million should allow him to retire comfortably. Here are two things to consider when calculating your expenses:

• Lifestyle. The numbers we’ve discussed here are just averages, so they don’t mean they’ll provide a comfortable retirement in all cases. For example, if you’ve worked hard and now want to indulge in a luxurious high-society lifestyle and fancy dining, $1.5 million may not be enough. Or if you live in a high cost of living area, you may need additional income. You may need to make adjustments in those cases.

• Medical expenses. Medical expenses can vary widely, but can be significant for some. For example, Fidelity suggests that the average 65-year-old retiree couple will need approximately $315,000 for medical expenses. While that number is a forecast for the rest of your life, assume you live to be 85. That would mean needing an additional $15,750 per year or $7,875 per person. Our income of $76,840 is still safe if single, but for a couple, it would put us up against our retirement earnings.

Bottom line

Having a $1.5 million portfolio is no small feat: many people don’t even reach the seven-figure mark. And in many cases, that amount will set you up for a comfortable retirement. However, it will not necessarily be enough for everyone. For example, if you want to live in a lavish retirement or live in an expensive area, $1.5 million may not be enough. So, as is often the case when it comes to finances, the answer to the question at hand is: it depends. Discuss your situation with a financial advisor to determine if your retirement will be financially secure.

Retirement Tips

• A Financial Advisor it can guide you through important financial decisions, such as determining your investment strategy. Free SmartAsset Tool connects you with up to three vetted financial advisors serving your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find a counselor who can help you reach your financial goals, start now.

• Deciding how to invest can be challenging, especially when you don’t know how much your money will grow over time. SmartAsset investment calculator It can help you estimate how much your money will grow to help you decide what type of investment is right for you.

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