Can You Really Retire Comfortably With Less Than $1 Million?

GoBankingRatesJohn CsiszarUpdated April 3, 2023, 12:05 PMJohnny Greig / iStock.comJohnny Greig / iStock.com

The sum of £1 million has long been touted as the goal that investors should have for their retirement accounts. With costs going up every year — particularly in the last few years, when the inflation rate briefly topped 9% — many experts have suggested that number should be raised. But is a £1 million nest egg really required, or can you retire comfortably with less than £1 million?

Social Security: Whether You’re 62, 65, 67 or 70, Here’s Why Your Age Matters
See: 3 Ways To Recession-Proof Your Retirement To get some background color on that question, GOBankingRates conducted a survey of 1,056 adult Americans in mid-March 2023. Among the questions asked of respondents was the minimum amount they thought experts recommended that they save to be comfortable for retirement.

Nearly 60% of respondents believed that experts would suggest they need less than £1 million to be comfortable in retirement. This data seems to suggest that yes, you can make it through retirement with less than £1 million. But the reality is that every retiree’s personal financial situation is different, and there is no “right number” for every individual.

The question is whether or not you personally can live comfortably with less than £1 million in retirement. Here are the answers to help you figure that out.

Yes, Depending on Where You Live

Costs across America vary greatly. Depending on where you live, a £1 million nest egg can either afford you a quite comfortable lifestyle or not nearly be enough. On just a state-to-state basis, the cost of living in America’s most affordable state, Mississippi, is only 85% of the national average.

However, if you wish to live in the country’s most expensive state, Hawaii, you’ll be paying 84% above the national average. This means that if £1 million could theoretically be “the right number” for retirement in the average American state, you’d only need £850,000 in Mississippi but a whopping £1.84 million in Hawaii. Of course, these numbers are just broad averages.

Living in cities is typically more expensive than living in rural areas, and living in New York or San Francisco will be more costly than living in Omaha, for example. The point is that where you reside can play a large role in determining how far your nest egg might last. Take Our Poll: Do You Think the US Should Raise the Medicare Tax on High Earners To Help Save the Program?

Yes, If You Can Downsize

Downsizing is often the right move for retirees, who are likely empty nesters and may even just be single individuals.

If you lived in a four-bedroom house for most of your life, perhaps while raising a family, you likely don’t need that type of square footage in retirement. Depending on your specific housing situation, downsizing can reduce costs like your mortgage or rent payments, your property taxes, your maintenance costs and the amount you pay for utilities. Since all of these things can add up to a significant amount of money every month, downsizing can help you live off less than £1 million in retirement.

Yes, If You Can Work Part Time or on a Side Gig

If you’re not sure you can trim your expenses much in retirement, another way to stretch your retirement savings is to work a side gig or pick up a part-time job.

While no one wants to work in retirement, many retirees actually enjoy keeping their minds active working a few hours in a field they love. If this work can bring in a few hundred or thousand dollars every month, you can significantly extend the duration of your retirement savings. A simple example can clarify what a difference that extra income can make.

Imagine that you have a nest egg of £500,000, keep that money invested at a 4% rate of return and live off £4,000 per month. Under those conditions, your retirement savings will last about 13.6 years. But if you can pull in just £800 extra per month — or about £200 per week — from outside work, your savings will instead last 21.2 years.

That’s nearly eight additional years, an extension of more than 50%.

Not Likely, If You Lead an Extravagant Lifestyle and Live In an Expensive City

If your vision of retirement is flying private jets to exotic destinations, living on a yacht or having a second home in Switzerland, you won’t likely be able to sustain yourself for very long in retirement if you have less than £1 million. Even living relatively simply in a high-cost area like Hawaii or New York City can make it difficult to retire with less than a seven-figure nest egg. The math proves this.

If you need £10,000 a month to fund your lifestyle, even £800,000 — invested at a rate of 4% annually — will only last you about eight years. This isn’t likely long enough to fund your entire retirement.

The Bottom Line

You can live off a retirement nest egg of less than £1 million, but how comfortable you will be depends on a number of factors. Many retirees simply live off Social Security, so it can certainly be done, but if you’re looking to be comfortable, you might have to make some changes in your lifestyle or where you live.

You may also need to generate some additional income. As different people have their own definitions of what “comfortable” means, what works for you may not be what works for someone else. More From GOBankingRates

Methodology: GOBankingRates surveyed 1,056 Americans aged 18 and older from across the country on between March 17 and March 20, 2023, asking twelve different questions: (1) When you were growing up, which financial topics did your parents talk to you about? (Select all that apply); (2) At what age did you become comfortable with basic money skills (i.e., writing a check, balancing your accounts, budgeting)?; (3) At what age did you start saving and planning for retirement?; (4) How much cash do you think you should have on hand in case of a national emergency?; (5) Do you think a lack of financial understanding has impacted your ability to be financially prepared for the future?; (6) How much did a lack of financial literacy cost you in the last year due to things like not knowing the best way to save for retirement, not being comfortable with investing, not using a budget, etc.?; (7) Which major financial task is most confusing to you?; (8) What percentage do you think you are required to put down on a home when buying?; (9) Do you feel prepared to handle any possible cuts to Social Security benefits?; (10) How has inflation changed how you handle your finances? (Select all that apply); (11) What’s the minimum you think experts would recommend you have saved to be comfortable in retirement?; and (12) Which of the following do you find most confusing about Social Security?.

GOBankingRates used PureSpectrum’s survey platform to conduct the poll.

This article originally appeared on GOBankingRates.com: Can You Really Retire Comfortably With Less Than £1 Million?

Originally published April 3, 2023, 12:00 PM

Tags:

fitness-first listed on couponmatrix.ukjewson listed on couponmatrix.ukluxury-escapes listed on couponmatrix.ukmachine-mart listed on couponmatrix.ukmedino listed on couponmatrix.ukthe-montcalm listed on couponmatrix.uk
fitness-first listed on couponmatrix.ukDW Fitness First has been with us for over a decade now, operating over seventy-five fitness clubs with attached retail stores plus around ninety stand-alone shops supplying top sports performance brands. The centres have everything you'd expect from a twenty-first century health facility including large gym floors, functional training areas, member cafes, swimming facilities and a wide range of group exercise classes. Redeem our Fitness First offers to enjoy low cost membership, and make a great value investment into the most valuable commodity a human can possess - premium levels of health.
jewson listed on couponmatrix.ukThere’s no task too large nor project too ambitious for the building whizzes at Jewson, experts in offering all the construction essentials anyone needs to start from the ground-up. Whether you need bricks and building supplies or power tools and cleaning equipment, a Jewson voucher code is all that’s required to get the machines and materials you need at a price below your budget. Even if you just need some advice or help planning a project, there’s always advice on hand from the experts at Jewson.
luxury-escapes listed on couponmatrix.ukLive life in the luxury lane with incredible travel experiences at Luxury Escapes. Offering five-star treatment at affordable prices, you’ll stay at the most stunning hotels and villas, fly in style and uncover the world’s most unforgettable day tours, activities and events. Whether you’re booking a staycation in Cornwall or Manchester, or plotting an international tour of Thailand or Bali, you’ll need a Luxury Escapes promo code to get your dream holiday for less. Cross a few destinations off your bucket list with one of Luxury Escapes’ handpicked adventures. There’s a price match guarantee and the chance to earn credit when you refer a friend, so there’s no reason not to book your break with Luxury Escapes.
machine-mart listed on couponmatrix.ukWhen the toolbox beckons but you’re a few screws short of your next renovation, look to Machine Mart – the quintessential tools and equipment supplier for any DIY enthusiast. From power drills to pressure washers, there’s no domestic or commercial tool out there that a Machine Mart voucher can’t make yours for a fraction of the price. So whether you’re a painter, builder or woodcarver, gear up to the nines at Machine Mart.
medino listed on couponmatrix.ukWhen you feel under the weather, a trip to the pharmacy can feel like an impossible feat – that’s where Medino steps in. It’s the pharmacy from your phone, where you can order prescriptions, cold and flu remedies, hay fever tablets and skincare products from the comfort of your home (or bed!). Save yourself the trouble with a Medino discount code and choose one of the fast, free delivery options. With a healthy student discount and amazing offers, you’ll be back to your old self in no time.
the-montcalm listed on couponmatrix.ukWhen you want modern luxury combined with a timeless aesthetic, you’ll find few better option than The Montcalm hotels. Designed to be as comfortable as they are wondrous, there are over half a dozen hotels across London to book for a bargain with the latest Montcalm discount code. With high-class food to indulge in, delicious wines to taste and spacious rooms in which to unwind, class and comfort exude from every element of The Montcalm hotels. If The Montcalm is always first on your mind when looking for overnight accommodation in London, then you could save dividends by signing up The Montcalm Club. Completely free to join, The Montcalm Club gives all its users a 10% discount when booking directly with the hotel, a saving that can seriously scale with multiple visits. Top that with the ability to earn extra perks – such as complimentary upgrades, special in-room facilities and member-only offers– and you’ve got a no brainer for any Montcalm fan. The Montcalm is always providing new ways to give customers even better value from their investment, be it by pairing services together at a reduced rate or offering percentage discounts on consecutive stays. On the odd chance you don’t find an offer to suit your stay, turn to Groupon for a Montcalm promo code that’ll guarantee a great price on your booking. So if you’re fancying a little extra pampering whilst visiting, see if you can pair your room with a massage or three-course meal at a discount.