One in three Americans in the workforce say they need more than $1 million to retire comfortably, and some 19 percent report that they need $2 million or more, according to a recent Bankrate survey. But is even $1 million still enough to live out your golden years in comfort?

“Yes, no and maybe so,” says Evan Patzer, retirement specialist at LifeWealth Solutions in Columbus, Ohio. Patzer says your individual circumstances matter a lot — not only your other sources of income, such as Social Security, but also your living expenses and lifestyle choices.

The right combination of income and expenses should make even $1 million a feasible nest egg for retirement, say planning experts, but it won’t be “Lifestyles of the Rich and Famous,” either. 

Is $1 million enough for retirement? Three areas to watch

Whether a cool million is enough to fund your retirement depends on the balance between your income and your expenses. There’s no amount of money that can’t be outspent, and so keeping a happy medium between your spending and income must remain an exercise in self-control.

Expenses can break any retirement budget

Because you can always outspend any amount of money, the best place to begin is to look at expenses. Keep your expenses low enough and you can live on any amount of money, so retirement advisors often focus first on defining what a retiree’s expenses are going to be. 

“Reducing your spending should be a top priority,” says Cynthia Campos Delgado, founder and financial advisor at Campos Wealth Management in McAllen, Texas.

To that end, you need a firm grasp on your spending, and a well-planned budget can help you get there. 

“It’s important that you create a realistic budget that takes into account all of your expenses including health care, housing, utilities, food and entertainment,” says Patzer.

Even the most well-planned budgets are strained from time to time, but what may seem like a one-off vacation may quickly turn into an out-of-control travel bug, busting your budget. Of course, it’s not just the fun expenses that you can overspend on, either. 

“Many retirees underestimate how much they will spend in retirement, especially on healthcare, travel and unexpected costs,” says Patzer.

Healthcare costs seem to rise every single year, so retirees would do well to plan on expenses that are higher than expected, year after year. 

You’re likely to find the most potential for savings in your largest expenses, such as housing.

“Reducing your monthly expenses on housing in retirement can significantly help to free up cash in retirement,” says Patzer. 

Plus, reducing your largest expenses can help you avoid tapping retirement accounts such as a 401(k) or IRA that could continue growing tax-free until you really need them. 

Delgado recommends splitting your budget in two — the necessary expenses and everything else — and then focusing on trimming what you don’t really need from your spending. 

Retirement income is a major focus

Whether $1 million suffices for retirement depends a lot on your other sources of income, too. Retirees have access to the steady payments of Social Security and may have a pension, though the days of company-sponsored retirement plans are largely over. 

So with budget in hand, you can then work backward to see how much you’ll need to draw from that $1 million kitty to make your budget work. Start with your guaranteed sources of income such as Social Security, annuities and other payouts. Patzer offers an example.

“Let’s say a married couple makes $72,000 a year from Social Security and pensions,” he says. “They need $100,000 a year to live comfortably. They would be fine living on $1 million saved, as they would only need to draw $28,000 a year from their investments.”

The average Social Security check for retired workers comes to about $1,919 per month as of July 2024, providing about $23,000 each year before you even begin to touch your retirement savings. That payout may rise over time with Social Security’s annual cost of living adjustment. 

Add in a spouse’s potential contributions from Social Security or other sources. From there, you’ll have the difference that your $1 million bankroll has to fund for the both of you. 

But that $1 million shouldn’t be a static amount. It should be invested to produce income, and you may well earn enough to cover not only the necessary gap but also increase your nest egg. 

“You’ll want to ensure your investments are diversified and appropriately balanced to generate income, while protecting against market volatility,” says Patzer.

Retirees could invest in some of the best dividend funds, for example, which hold dozens and even hundreds of different stocks. In contrast, the best bond funds may offer steady income with less potential for gain over time. Of course, retirees can split the difference here, too, with money invested in both steadier, higher-yielding bonds and more volatile but faster-growing stocks. 

“Another key point is not to have all your assets in one type of investment,” says Delgado. “The market fluctuates and you need to be prepared and protected against those down times.”  

Invested well, your $1 million may continue to grow even while you tap it for income each year. Working with a financial advisor can help you get your retirement income on track, and Bankrate offers a financial advisor matching tool to match clients with advisors in minutes.

Living large can wreck your retirement

“Unrealistic spending habits and not establishing a budget are ways people hurt their retirement budgets,” says Delgado. 

Once-in-a-lifetime vacations that happen every year (or even more often) can be thrilling, but they can come at the expense of your future retirement security. If you’re planning to not outlive your retirement income, it’s important to make that budget and then stick to it. At the same time, if you’re under budget, you can make that big purchase without much worry. 

In the end, it’s fine to spend, but make sure you get the value you want from it. If you spend and then at the end of the month don’t know where the money went, maybe it’s time for a re-think.  

“Small changes in dining out, entertainment and travel can add up without drastically affecting your lifestyle,” says Patzer.

Don’t forget inflation when planning retirement

Staying on top of your expenses and income are important, but long-term budgets can be ruined by not factoring in inflation. This steady creep of rising prices can diminish your purchasing power, and given enough time, what once seemed like luxurious income may feel a bit threadbare.

“Failing to account for inflation can lead to a significant shortfall in your later retirement years,” says Patzer.

Inflation compounds over time, so a stagnant income buys less and less. Retirees need to factor in inflation not only on the expense side — especially for healthcare — but also on the income side. While Social Security payments may rise over time, that should be only part of your total income. You’ll need that $1 million growing, too, so you have greater income in the future. 

Investments in growth assets such as the best stock funds can help your bankroll increase so that you don’t outlive your resources. Advisors say that retirement can easily last 25 or 30 years these days and that growth investments are a necessary element of your financial security. 

Bottom line

“It is most definitely possible to retire on $1 million,” says Delgado. “However, doing so depends on each individual.” 

Stretching that retirement money may involve some changes, such as moving out of high-cost cities in favor of moderately priced areas or downsizing your home. But $1 million plus other sources of income give you a lot of options, especially for those who are willing to be flexible. 

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.