Can I Retire With 1 Million Dollars at 55?
$1,000,000 is a common benchmark when it comes to retirement goals because it sounds like you got a lot of money. But my question is, can I retire with 1 million dollars at 55 ?
Lot of financial institutes will recommend this number as your saving goal. $1,000,000 is a great goal to strive for. However, I want you to remember the truth that one million dollar is not what it used to be. In fact, it probably isn’t even enough for you to live comfortably and have a great enjoyable retirement.
I know it has to be shocking, so let’s understand this a little better. Let’s try to figure out how long a million dollars will actually last in retirement. To do this, we have to figure out the factors affecting how much your retirement costs.
Factors Affecting your Retirement Cost
First problem is setting a million dollars as a standard benchmark across the board for how much people should save for retirement.
Fact is, cost of living varies dramatically depending on where you’re located. Person living in a small town by South Georgia million dollars will lasts longer than a person living in New York City or Honolulu. In order to determine whether a million dollars will be enough to retire on, it is crucial to factor in the cost of living at your desired location when you retired.
Some people are able to get by perfectly fine on less than $20,000 a year, and are quite happy doing it. Most like, they live in some low income communities and save lot of money. These people can answer yes to our question, can I retire with 1 million dollars at 55 ?
Others have become accustomed to lifestyles that might cost a little more than that. Some of us are really used to living the six-figure lifestyle just to maintain things. It’s one thing to calculate just how much you need to save just to survive post retirement. It’s another thing entirely to calculate how much you need to save to pay for the lifestyle you’ve become accustomed to.
Adjusting for Inflation
Since this figure is going to be different for every person, setting a single benchmark of $1,000,000 that applies to everybody is ineffective, granted it’s a lot of money. For many people this is simply not enough.
Inflation is the ever-present force that we have to take into account because it slowly erodes the value of the money we set over time. Good news is, investing your money in companies rather than keeping it in cash will allow you to bypass inflation.
Stock market typically outperforms inflation. However, this doesn’t change the fact that inflation skews the true value of the one million benchmark. Million dollars made you very rich back in 1900s. Today, not quite so much.
The truth is the buying power of 1 million dollars today is much higher than future buying power of 1 million. For this reason, it’s a good idea to factor in the average inflation rate when you’re setting your retirement goals. Every person’s retirement needs are going to be different. How much you need to retire is going to be influenced by your location, your lifestyle, the inflation rate, and your wealth.
Reasons WHY you CANNOT Retire with 1 Million Dollars
Can I Retire With 1 Million Dollars at 55 and the sobering answer to this is probably not. There are varieties of reason why 1 million dollars won’t be enough to retire on for average people.
From increased life expectancy to rising costs, several factors will affect your spending habits. There are so many unknown factors and variable. I recommend that you sit down and calculate your own goal based retirement spendings first. Make sure these calculations are based on your own situation rather than relying on standard benchmarks.
In order to calculate that figure, determining how much money you want to have available each year. Multiply that number by the upper-end optimistic estimate of the years you expect to be in retirement.
Example: If you’re healthy at 65 years old, you’re going to live to be 90. In this case, your calculation will be like this: (average yearly spending) x (90-65).
Now you know what to do, go out and start figuring what that’s going to do to you and your retirement goals. Do the calculations so you can answer your question, can I retire with 1 million dollars at 55. Factor in inflation, start saving toward that little goal, little bit at a time.
Let’s say you calculated the number and number you come up is bit large. You might be shock to know how much you will need to retire at 55. It is true, it will cost you much more than before to retire.
But hear me out, here’s the cool thing. If you’re a good investor and not a speculator, than this is easily attainable. You need be an investor who’s following market strategy and is discipline not spend unnecessary money. It is amazing how little time it takes for you to achieve your goals if you invest it right.
I want to tell you one more thing about that million dollars. Let’s say you’re planning on retiring 20 years down the road. If you are someone who wants to spend minimal lifestyle, than you can easily do it with 50k to 60k per year. However, with this budget you are limited to low cost activities. You cannot support more than 2-3 vacations per year at this income during retirement. You can’t go to Hawaii every third week. However, you can have a decent lifestyle that you’ll be able to enjoy.
In retirement, you’re gonna need well over two million dollars, unless you know how to invest that money and get a really solid low-risk high rate of return.
I’d love to hear from you guys. If you are worried about how long your money will last in retirement, leave a comment below with your answer. I’ll be sure to follow up with you and thanks for reading this article. Make sure to check out my recent posts on how to earn compound interest and retire early.