How much monthly income will $1 million generate?
($1 million / 30 years = $33,333 / 12 months = $2,777) With your $2,500 in Social Security, this would give you about $5,200 per month to live on. This is a reasonably comfortable income in most parts of the country, although it would also have a hard end-date.
According to Schwab, even if you invested in your annuity on the day of your retirement, with $1 million you can potentially collect $6,000 per month or more for the rest of your life. All of which is to say that with $1 million, you can certainly collect a comfortable amount of money in your retirement.
Once you have $1 million in assets, you can look seriously at living entirely off the returns of a portfolio. After all, the S&P 500 alone averages 10% returns per year. Setting aside taxes and down-year investment portfolio management, a $1 million index fund could provide $100,000 annually.
Here, say that you have $1 million in a 401(k) or IRA, and expect to receive $2,500 per month in Social Security payments, a number right in the mid-range of possible benefits. Can you retire at 65? Well, it certainly depends on your standard of living. But for most people the answer is yes.
Around the U.S., a $1 million nest egg can cover an average of 18.9 years worth of living expenses, GoBankingRates found. But where you retire can have a profound impact on how far your money goes, ranging from as a little as 10 years in Hawaii to more than than 20 years in more than a dozen states.
How much you need to live off interest depends entirely on your expenses and where the balance is invested. A million dollars in a retirement account might produce enough income for the median American to get by, but you'd need larger returns to cover a six-figure lifestyle. Consider your lifestyle goals, too.
A recent analysis determined that a $1 million retirement nest egg may only last about 20 years depending on what state you live in. Based on this, if you retire at age 65 and live until you turn 84, $1 million will probably be enough retirement savings for you.
Bonds and money market accounts may be a good option for those with more conservative risk tolerance. Treasury bonds and municipal bonds typically offer lower returns but come with less risk. With a bond paying a 2% interest rate, a $1 million investment could earn you $20,000 per bond pay interest income annually.
With $1,000,000 invested, you will get $46,700 per year in interest. A lot of retirees gradually shift to more stable retirement income funds. Those kinds of funds usually invest in less risky bonds and large-cap companies. They're designed to provide income and some capital growth.
It's definitely possible, but there are several factors to consider—including cost of living, the taxes you'll owe on your withdrawals, and how you want to live in retirement—when thinking about how much money you'll need to retire in the future.
At what age is Social Security no longer taxed?
Social Security can potentially be subject to tax regardless of your age. While you may have heard at some point that Social Security is no longer taxable after 70 or some other age, this isn't the case. In reality, Social Security is taxed at any age if your income exceeds a certain level.
The maximum Social Security benefit in 2024 is $4,873 per month, but you'll need to reach certain milestones to be eligible for it.
The point is that if you earned $120,000 per year for the past 35 years, thanks to the annual maximum taxable wage limits, the maximum Social Security benefit you could get at full retirement age is $2,687.
Average Monthly Retirement Income
According to data from the BLS, average 2022 incomes after taxes were as follows for older households: 65-74 years: $63,187 per year or $5,266 per month. 75 and older: $47,928 per year or $3,994 per month.
- In 2022, the average (median) retirement savings for American households was $87,000.
- Median retirement savings for Americans younger than 35 was $18,800 as of 2022.
- 62% of Americans aged 18 to 29 have some retirement savings, but only 30% percent feel on track for retirement.
Age range | Average balance | Median balance |
---|---|---|
35-44 | $76,354 | $28,318 |
45-54 | $142,069 | $48,301 |
55-64 | $207,874 | $71,168 |
65+ | $232,710 | $70,620 |
State | Income | Years |
---|---|---|
Hawaii | $131,175 | 8 |
Washington DC | $108,192 | 9 |
Massachusetts | $103,422 | 10 |
California | $100,965 | 10 |
With $800k initially saved, you could withdraw $40k-60k annually and still have your portfolio last between 19-28 years. The higher your spending amount, the faster your savings get depleted. Assessing your specific retirement costs and life expectancy is key to determining withdrawal rate.
Retirement age | Length of time covered by the $200k (assuming a life expectancy of 80 years) |
---|---|
45 | 35 years |
50 | 30 years |
55 | 25 years |
60 | 20 years |
Fidelity also reported that the number of 401(k) accounts with balances of at least $1 million rose in the fourth quarter by 20%, to 422,000 accounts; and by 41% for the whole year. The average account balance for this group was $1,551,300 in the fourth quarter.
Can I retire on 500k plus Social Security?
Most people in the U.S. retire with less than $1 million. $500,000 is a healthy nest egg to supplement Social Security and other income sources. Assuming a 4% withdrawal rate, $500,000 could provide $20,000/year of inflation-adjusted income.
At the current Treasury rate of 4.3%, a $1 million portfolio would generate about $43,000 per year, or roughly $3,500 per month. With your Social Security payments that would generate about $6,000, again enough to live comfortably in most places.
Cash equivalents are financial instruments that are almost as liquid as cash and are popular investments for millionaires. Examples of cash equivalents are money market mutual funds, certificates of deposit, commercial paper and Treasury bills. Some millionaires keep their cash in Treasury bills.
Generally, there is no limit on deposits. However, there are limitations on the amount of funds the Federal Deposit Insurance Corporation (FDIC) will insure. Please refer to the Understanding Deposit Insurance section of the FDIC's website for more information on FDIC deposit insurance.
Rank | Asset | Average Proportion of Total Wealth |
---|---|---|
1 | Primary and Secondary Homes | 32% |
2 | Equities | 18% |
3 | Commercial Property | 14% |
4 | Bonds | 12% |
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