How Long Will $1 Million Last in Retirement? Key Strategies to Make It Last Longer
Saving $1 million for retirement is a significant accomplishment, but in today's financial landscape, that amount doesn’t stretch as far as it once did. Many retirees worry about whether their savings will last through their golden years, and rightly so. The longevity of your retirement nest egg depends on several factors, including your withdrawal strategy, investment approach, and tax planning. With the right adjustments, you can significantly extend the lifespan of your savings.
In this post, we’ll walk through a real-life example (with adjusted details for privacy) to demonstrate how long $1 million might last and how small tweaks to your plan can make a big impact.
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Meet Andy: A Typical Retiree Profile
To visualize how long $1 million might last, let's consider Andy, a hypothetical retiree. Andy is 60 years old and plans to retire this year. His financial situation looks like this:
Cash savings: $25,000
Pre-tax 401(k): $700,000
Roth 401(k): $100,000
Brokerage account: $200,000
Home value: $550,000 (with a small remaining mortgage)
Retirement spending goal: $4,000/month (adjusted for inflation)
Healthcare expenses: $300/month for marketplace health insurance before Medicare kicks in
Long-term care budget: $68,000 per year for the last two years of life
Social Security: Expected to receive $2,500/month starting at age 67
With these factors in mind, let’s explore different retirement scenarios to see how long his money might last.
The Baseline Projection: Will Andy Run Out of Money?
To analyze Andy’s situation, we ran a Monte Carlo simulation—a financial planning method that projects thousands of possible market scenarios to estimate how long his savings might last.
Results:
Median scenario: Andy runs out of money by age 90.
Worst-case scenario: Some projections show him running out of money as early as age 79 or 80.
Probability of success: Only 34% of scenarios result in Andy having enough funds to last through his lifetime.
Clearly, Andy needs to make adjustments to improve his financial outlook. Let’s explore three key strategies that can help.
Strategy #1: Adjusting the Spending Plan (The Retirement Spending Smile)
Many financial plans assume retirees will increase spending every year to keep up with inflation. However, research shows that spending tends to follow a "retirement spending smile" pattern.
Early Retirement (60-70): Higher spending on travel, hobbies, and entertainment.
Mid Retirement (70-85): Spending slows as retirees settle into a routine.
Late Retirement (85+): Healthcare costs rise, but overall discretionary spending remains lower.
A simple way to account for this is to adjust spending increases slightly below inflation. Instead of increasing withdrawals by 4% annually (assuming 4% inflation), Andy could increase them by just 3%.
Impact: This small change alone significantly improves his financial outlook, reducing the likelihood of running out of money too soon.
Strategy #2: Optimizing Investment Allocation
Andy is currently invested in a conservative 50/50 stock-to-bond ratio. While conservative investing feels safe, it may not provide enough growth to outpace inflation over 30+ years of retirement.
A more balanced approach could be:
30% in bonds and cash (5 years’ worth of expenses for security)
70% in stocks (to ensure long-term growth)
With this allocation, Andy can withdraw from his cash and bonds in down markets while allowing his stocks to recover. Over time, a more growth-oriented strategy provides a higher probability of success.
Impact:
The median scenario now shows Andy having funds well into his 90s.
Even in the worst-case scenarios, his portfolio is far less likely to be depleted early.
Strategy #3: Implementing a Tax-Efficient Withdrawal Strategy
The default approach most retirees take is withdrawing from each account proportionally (a mix of taxable, tax-deferred, and tax-free accounts). However, a more tax-efficient method can make a significant difference.
A Better Approach:
Use taxable brokerage funds first: Since withdrawals from these accounts are taxed at lower capital gains rates, this strategy allows tax-advantaged accounts (401(k) and Roth) to grow longer.
Convert pre-tax 401(k) funds to a Roth IRA strategically: If Andy has room in lower tax brackets, he can do Roth conversions to minimize future Required Minimum Distributions (RMDs) and avoid higher taxes later.
Delay Social Security to maximize benefits: If Andy waits until age 70, his benefit increases by 8% per year past his full retirement age.
Impact: Andy saves an estimated $28,000 in taxes over his lifetime, allowing him to keep more of his savings.
The Ultimate Solution: Dynamic Guardrail Strategy
One additional strategy that provides flexibility is the retirement income guardrail approach. Instead of sticking to a fixed withdrawal rate, this strategy allows retirees to adjust spending based on market performance.
If investments perform well: Andy can increase his spending safely.
If the market declines: He temporarily reduces withdrawals to preserve his portfolio.
How Guardrails Work:
Upper Guardrail: If Andy’s portfolio grows to $1.07 million, he can increase his monthly withdrawals.
Lower Guardrail: If his portfolio falls to $700,000, he should reduce spending slightly to avoid running out of money.
This approach balances security with flexibility, ensuring Andy doesn’t live too frugally early on or risk depleting his savings prematurely.
Final Results: How Long Will Andy’s Money Last?
With these optimizations:
Baseline projection (without changes): 34% chance of success, with a high risk of running out of money.
After implementing a better spending, investment, and tax strategy: Andy’s success rate increases dramatically, with median projections showing a remaining balance of $1.1 million at age 92.
Using a dynamic guardrail strategy: Instead of hoarding money until late in life, Andy can safely spend an additional $700,000 over his lifetime while still maintaining financial security.
Key Takeaways
Spending adjustments matter: Following the retirement spending smile can extend your savings significantly.
Invest wisely: A balanced portfolio (such as 70/30 stocks and bonds) helps combat inflation while maintaining stability.
Smart tax strategies save money: Proper withdrawal sequencing and Roth conversions can reduce lifetime tax burdens.
Flexibility is key: Using dynamic guardrails ensures you don’t overspend or underspend in retirement.
Need Help Optimizing Your Retirement Plan?
If you want personalized guidance on how to make your retirement savings last, we’d love to help. Schedule a free consultation with us to explore strategies tailored to your unique financial situation.
Jake is a CFP Professional with a focus on planning for both traditional and early retirement. He’s a Florida native, growing up in Fort Lauderdale and now residing in Jacksonville with his husband Chris and their 120-lb “puppy” Barli. Jake enjoys cooking (favorite cuisine to make is Thai), traveling, and spending time with friends and family as much as possible.
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