How Long Will $1 Million Last in Retirement?

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How long will $1 million dollars last in retirement? 

It’s a great question and one certainly worth contemplating as we get older, hopefully wiser, and have done our due diligence with our 401(k) over the years. 

The best answer: The average is 20 years, according to most experts. Spreading that retirement money out long term will allow you to live comfortably, assuming some unpredictable factors like long-term health care needs do not come into play. Where you live also is a factor. (More on that later). 

“A million dollars seems like a lot; but in today’s world, it’s not a lot of money,” Brent Lipschultz, a partner with accounting and advisory firm EisnerAmper in New York City, told U.S. News & World Report. 

Of course, that also assumes that someone has saved $1 million. The Motley Fool recently conducted a survey, published in June, that reveals some sobering statistics: 

  • In 2019, the average retirement account savings for American households was $65,000.  
  • The average American under 35 has $13,000 saved for retirement. 
  • 62% of Americans aged 18 to 29 have some retirement savings, but only 28% percent feel on track for retirement. 
  • 55% of non-retirees have a 401(k) or 403(b) while 25% have no retirement savings. 

But let’s look at the brighter side of things. You have a million dollars in your hands and are ready to ride it out and use it to fund a fulfilling retirement. Where you decide to retire will definitely come into play in terms of how far the money will go.  

There are five significant factors to consider in terms of costs: Housing, health care, groceries, utilities, and transportation. Here are factors to consider in all categories: 

  • Housing. Consider this the largest expense for retirees. It includes mortgage, rent, property taxes, insurance, and any maintenance and repairs on your property. On average, a retiree spends $17,472 per year ($1,456 per month) on housing expenses. That represents more than one-third (35 %) of average expenditures. Almost half of homeowners between the ages of 65-79, and one in every four people aged 80-plus, are still paying off a mortgage, according to a recent study published by Harvard’s Joint Center for Housing Studies. 
  • Healthcare. This ranks third on the expenditure list for retirees and includes health insurance, medical services, supplies and drugs. The average yearly expenditure is $6,833 (or $569 per month), with the bulk of that money going toward health insurance. “Health care is creating a ‘retirement cost gap’ for many pre-retirees,” Steve Feinschreiber, senior vice president of the Financial Solutions Group at Fidelity, told fidelity.com. “Many people assume Medicare will cover all your health care cost in retirement, but it doesn’t. We estimate that about 15% of the average retiree’s annual expenses will be used for health care-related expenses, including Medicare premiums and out-of-pocket expenses. So, you should carefully weigh all options.” 
  • Groceries. Retirees spend about $6,599 ($550 a month), which is less than the numbers for the average household ($8,169 annually/$681 monthly). An average of $2,536 goes toward eating out. 
  • Utilities and public services. Retirees spend an average of $3,810 per year on utilities (electricity, natural gas) and other services that include phone and water. That is slightly less than the average household expenditure of $4,055. There are ways to save money on these expenditures, including purchasing a programmable thermostat and using LED light bulbs. 
  • Transportation. Retirees need to find a means to get around town. On average, retiree households spend $7,492 yearly on transportation costs (vehicles, gas and insurance). By comparison, an average household spends $10,742 on transportation. 

Using data from the Bureau of Labor Statistics’ 2018 Consumer Expenditure Survey, Gobankingrates.com compiled the Cost of Living Index for each state using those annual expenditures. The states were ranked from the shortest to the longest period of time $1 million would last. Crunching those numbers across all 50 states, here are the five states where you will get the most out of $1 million in retirement savings:

  • Mississippi (23 years, 2 months, 2 days) 
  • Oklahoma (22 years, 8 months, 17 days) 
  • Arkansas (22 years, 6 months, 22 days) 
  • New Mexico (22 years, 3 months, 10 days) 
  • Kansas (22 years, 2 months, 14 days) 
What about Florida? 

The Sunshine State doesn’t quite stack up numbers-wise to the previously mentioned states. But quality of life is a consideration, and as real-estate agents like to say, “location, location, location.” Here is Florida’s estimate: 20 years, 0 months, 3 days

The least number of years? 
  • Hawaii (10 years, 2 months, 29 days) 
  • California (14 years, 3 months, 7 days) 
  • New York (14 years, 3 months, 22 days) 
  • Oregon (14 years, 7 months, 29 days) 
  • Massachusetts (15 years, 1 month, 6 days) 

Financial planning for retirement years is critical, and the Alliance for Lifetime Income has an excellent basic checklist to get you going in the right direction.  

Here’s to a happy retirement, wherever you decide to spend your golden years. 

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