Personal Finance

How Long Will a Million Dollars Last in Retirement?

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Editor’s Note: This story originally appeared on Personal Capital.

A lot of people wonder exactly how much money they’re going to need in order to enjoy a comfortable retirement. One common benchmark for retirement savings is $1 million.

“Surely, if I’ve saved up a million bucks, I’ll be able to retire comfortably,” is how this thinking traditionally goes.

But is this really the case? Is a million dollars enough money to ensure a financially secure retirement today? One study determined that a $1 million retirement nest egg will last about 19 years on average.

Based on this, if you retire at age 65 and live until you turn 84, $1 million will be enough retirement savings for you.

However, this average varies considerably. How long $1 million will last in retirement depends on a large number of factors, including the key ones listed next.

1. Your desired retirement lifestyle

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Do you have a picture in your mind of what retirement will look like for you? For example, do you plan to travel extensively, dine at the best restaurants, spend time with children and grandchildren (and spoil the grandkids), tour the country in a motorhome, buy a yacht or sailboat, or join a country club? If so, you may need considerably more than $1 million to support this kind of lifestyle.

On the other hand, if you envision a simpler and more frugal retirement lifestyle, $1 million might be plenty of money for you to retire on and still leave a generous inheritance for your heirs.

Calculate it: Are you saving enough to retire comfortably?

2. Your rate of return on retirement funds

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When entering retirement, many people adjust their asset allocation to a less risky mix of stocks, bonds, and cash equivalents. While boosting safety and reducing volatility, this generally comes with an expectation of lower rates of return throughout retirement.

Finding a creative balance between risk and return could potentially stretch a $1 million retirement nest egg significantly further if that money was invested more aggressively throughout retirement.

Managing the risk-reward tradeoff is something that each individual and couple must seriously consider, and can be a key conversation to have with a financial adviser.

3. Your health and life expectancy

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Health care expenses can eat up a big chunk of your retirement nest egg, depending on the type of health care coverage you have and what health issues you encounter during your retirement.

While Medicare will partially cover many health care expenses, there will still be copays and other out-of-pocket medical expenses you’re responsible for. If you are in poor health or experience major medical complications after you retire, this could drain your $1 million nest egg faster than you may have planned.

Further, if your family has a history of longevity, you might live longer than average. If you’re one of the lucky folks who beat the average lifespan, you might need more than $1 million to last throughout retirement. According to the Centers for Disease Control and Prevention (CDC), the average life expectancy in the U.S. is 78.7 years. This breaks out to 76.2 years for men and 81.2 years for women.

4. Where you live in retirement

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This study determined how long a $1 million nest egg will last on average in each state.

One million dollars will last the longest — just over 23 years — in Mississippi, while it will last the shortest — just over 10 years — in Hawaii, according to the study.

The tax burden in your state is one of the factors affecting how fast your nest egg shrinks. And more important than state tax rates is generally the overall cost of living. Some retirees choose to relocate in retirement to reduce the drain of these factors on their savings.

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