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You’ve done the hard part — you saved $1 million for retirement, and now it’s time to enjoy your golden years. But the big question looms: How long will that money last once you hit 70?

While $1 million seems like a lot, your lifestyle, spending habits, and the income you generate during retirement will ultimately determine how long it lasts. Let’s dive into the factors that can stretch or shrink your retirement nest egg and affect your budget.

The 4% rule: A starting point

The 4% rule is a popular guideline in retirement planning. It suggests that you can withdraw 4% of your portfolio each year during retirement and have a low likelihood of outliving your savings over 30 years.

So, if you have $1 million saved, the 4% rule says you can safely withdraw $40,000 in your first year of retirement, increasing that amount each year to keep pace with inflation.

It’s a helpful starting point, but the 4% rule isn’t perfect. It doesn’t consider factors like portfolio composition, taxes, or fees. Plus, not everyone’s retirement will last 30 years.

A 2019 study published in the BMJ found that 16% of men and 34% of women live to age 90, but the average life expectancy in the U.S. is closer to 77.5 years. So, while planning for a 30-year retirement is a good safety net, it’s important to remember that you may need less — or more –depending on your circumstances.

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Your location plays a role

Where you retire has a significant impact on how long $1 million will last. Retiring to a lower-cost area can stretch your money further, while living in an expensive city can greatly reduce your savings. Retirees in lower-cost states like Florida or Arizona spend around $50,220 per year, which fits nicely into the 4% rule’s budget.

But if you’re planning to retire in high-cost areas like New York or San Francisco, those annual expenses could easily double, significantly reducing the lifespan of your savings. Consider downsizing or moving to a more affordable location if you want to make that $1 million last longer.

Healthcare: The unpredictable factor

One of the biggest unknowns in retirement is healthcare costs. As you age, healthcare expenses tend to increase, and while Medicare can help, it doesn’t cover everything. Fidelity estimates that a 65-year-old couple retiring today will need about $315,000 just for healthcare costs in retirement — an amount that can quickly eat into your savings.

Medicare covers many basics, but you’ll still face premiums, deductibles, co-pays, and other out-of-pocket expenses. And if long-term care becomes necessary, the costs can skyrocket, which is why many retirees invest in long-term care insurance to protect their savings.

Diversifying income sources

The amount of income you generate during retirement will also impact how long your savings last. Social Security is a reliable income stream for most retirees. In 2024, the average Social Security benefit is about $1,862 per month, or $22,344 annually. That’s a helpful supplement to your savings, but it’s by no means enough to live on.

Other potential income sources could include a part-time job, which boosts your finances and improves your quality of life by keeping you active and social. Additionally, if you’re one of the lucky few retirees with a pension, that steady income can significantly affect how long your $1 million lasts.

Inflation: The silent savings killer

Inflation is an important factor that can erode the purchasing power of your retirement savings over time. Even with modest inflation rates of 2% to 3%, your $40,000 annual withdrawal from your $1 million nest egg won’t stretch as far in 10 or 15 years as it did in your first year of retirement.

Investing a portion of your portfolio in growth-oriented assets like stocks can help combat inflation. While stocks come with risks, they also offer the potential for returns that can outpace inflation, allowing your savings to grow and maintain their purchasing power.

Managing your portfolio and sequence risk

When planning for retirement, it’s crucial to balance risk and reward in your investment portfolio. Stocks offer the potential for higher returns but come with higher risks, while bonds and annuities offer more stability with lower returns. Finding a balance that suits your comfort level is key to ensuring your savings last.

One major risk retirees face is sequence risk, which refers to the danger of a market downturn early in your retirement. If you have a large portion of your portfolio in stocks, and the market crashes right when you retire, it can significantly reduce your cash flow for the rest of your life.

To mitigate this risk, shifting some of your investments to safer, lower-risk options as you approach retirement is a good idea. By diversifying your portfolio across different asset classes, you can create a mix that balances risk and return, further helping your $1 million stretch.

The bottom line

So, how long does $1 million last after you turn 70? It depends. If you follow the 4% rule, plan for healthcare costs, manage inflation, and diversify your investments, you’ll have a good shot at making it last for 20 to 30 years.

But life doesn’t always follow a set formula. Unexpected expenses, inflation spikes, or market downturns can affect how long your money lasts.

The key is to create a flexible plan that adapts to changes, balances risk, and includes multiple sources of income like Social Security or part-time work. With thoughtful planning, that $1 million can go a long way toward securing a comfortable and enjoyable retirement.

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