September 17, 2018

Can You Retire With Less Than a Million Dollars? Absolutely!

$1,000,000 is the minimum you need in your investments accounts to have a satisfying retirement, according to many retirement advice sources. Others say you need something north of $2 million to rest easy.

As regular readers know, I tend to push back against such generalizations. How someone can draw a line in the sand and tell you what you must have or must do without knowing you and your situation is silly.  I offer suggestions and advice based on my experiences and feedback from readers, but I hope I am never guilty of telling you "my way or doom."

That being said let me offer some thoughts on how the non-millionaires among us can still retire and enjoy a fulfilling and stimulating life. Again, I will say these are thoughts from me. They may not work for you, or you may have even better ideas which I sincerely hope you will leave as comments below.

In the interest of full disclosure I will state that with all my assets, minus my almost non-existent debt, Betty and I are technically millionaires. But, I have never thought of myself that way, and honestly, I live my life denying that fact. I live my retirement years on a nest egg that I see as several hundred thousand dollars below that figure. Why? To give me a safety net if everything starts to fall apart and to keep me from making the mistakes that I see too many others making: living for wants and instead of a balance of needs and wants.

How to retire without a million dollars is really quite simple: adjust your lifestyle to what you have to work with. That includes any 401(k) or IRA accounts, any other investment accounts, Social Security, the value of your home or other real estate, projected inheritance (if any), and part time or full time income.


1) The vast majority of us can substantially lower our everyday expenses after retirement. The average of those surveyed for one of my books is much closer to folks living on 50% of their pre-retirement income. Betty and I are closer to 40%, even though we live well and are much happier than when my salary was into six figures. Possessions and things don't motivate us nearly as much.

2) For unexpected emergencies and expenses set aside enough to live for 6 months, or pay for a large emergency. Remember, even if you have insurance for whatever the problem, you will probably have to fight for that money and/or wait months or years to be reimbursed. The worst scenario is to max out credit cards or a home equity loan.

3) Simplicity and retirement can often go together. Most of the retirees I come into contact with, both in real life and through the blog, have downsized both possessions and desires. Less really is more: more time, freedom, and flexibility. Keeping up with the Joneses becomes very unimportant.

4) Adjust your expenses based on two things: changes in your investments and changes in your lifestyle. This is rather obvious. When my investments were earning 8-10% my income and spending options were different than they are with something closer to 3%. And, Betty and I are very happy with simple meals, simple pleasures, and simple living.

5) Accept that the condo on Maui and extended cruises may be out of reach. Rejoice in all you can do. With a nest egg of less than $1,000,000 and upwards of 30 years left to live, your ability to live a very satisfying life is quite likely. Focus on what you do have and what you can do. Even if you live almost solely on Social Security and must count every penny, remember you are still better off than at least 80% of the rest of the people on this planet. We have so many opportunities and blessings we can lose sight of how good we really do have it.

6) Aggressively protect your health. As I age I realize how incredibly crucial this is to the rest of my satisfying retirement. Taking shortcuts now in terms of foods I eat, exercising, and regular health checkups will cost me later, and I don't just mean monetarily. I mean in my mobility and freedom to do what pleases me. I mean in how much of a burden I place on loved ones.

It is hard for me to explain completely how much more fulfilling and satisfying my lifestyle is today on 60% less money than I once earned. As soon as I adjusted my mindset to living and not spending a load was lifted and my life took on a whole new depth and sweetness.

How much do you need to achieve this same state? I have no idea and I'm not going to give you a figure. That is for you to determine. But, I will tell you the experts are wrong: you can be happy and productive without achieving whatever is the latest magic number they are promoting.


  1. Like you Bob, our retirement income is about 40% of what we earned when we were working (actually slightly under that) and I find we have more money to spend now. This is for a few reasons.

    1/ We no longer have to put large parts of our income into furiously saving for retirement and that frees up a lot of cash.

    2/ With less income we pay a lot less in taxes. My income tax rate is 30% of what it was when I working.

    3/ All the income we have is for spending, there's no need to keep something aside for a rainy day because our savings are already in place. What we do is have the "emergency amounts" in our retirement accounts in cash or near cash investments for 2 years plus current. That way we have access if necessary and can hopefully ride out any major downturn if/when that happens.

    Your comment about being a millionaire but not feeling like one is common. I often hear people saying they are "middle class" with a six figure income when in fact they are more likely in the top 5%. I think people believe they are still the same "middle class" that they were years ago when they were growing up no matter their current circumstances. Human nature I think.

    Either way it's always good to live within your means whatever they are and to look after your health.

    1. I also wanted to comment that "live within your means" in retirement means you can probably spend more than you think. Most retirees have no idea how much they can spend and are often overly conservative, especially in the early years when they have the best health and the most energy.

      A study earlier this year by the Washington-based Employee Benefit Research Institute showed that people who had been retired for 18 years still had assets equal to 89 per cent of their starting amount. Experts calculate that they would have been safe to not "run out of money" at only 50% remaining. That's a lot of forgone spending in their early retirement that they may not get to enjoy later on due to health or other reasons. Consider that if these people had retired at age 62 they would be 80 after 18 years and the reality is for most of us there's not a lot of time left after that.

    2. The tax issue is a good one to mention. Like you, our tax bill is much less than before retirement. With the doubling of personal exemptions I doubt if I will have to bother with the bookkeeping required to itemize deductions anymore. When Betty starts Medicare next year our medical costs will drop dramatically.

      You have mentioned before the facts regarding people's spending habits after retirement, but it is good to remind folks of their likely safety. It is a hard message to accept, but the missed opportunities and memories due to monetary fears is usually misplaced. I am certainly in the camp of someone whose retirement account is bigger than when I quit work but I still hold on to the purse strings pretty tightly.

      Betty and I did agree that for at least the next 4-5 years we will hold off on much house remodeling or changing. Instead we will take one vacation trip per year to someplace we have not been or do something we have not done before, plus one trip to a favorite place.

    3. Yes, I do keep beating the drum of "you can spend more than you think in retirement" (sorry about that). With the $millions the financial press often says that you need to retire and even then to not spend it because you might need it for a care or medical costs is way over done. It keeps some people from retiring and then it keeps many from enjoying the retirement they spent decades saving for. As your post points out once retired it is truly surprising how well you can live on a fraction of your previous working income.

    4. No, I am glad you do. It is important for us to realize that our planning and sacrifices during our working years should have a positive use during retirement. I, for one, am trying to enjoy more of what we have in a way that will give us memories and experiences.

  2. Thank you so much for this article.
    I think I have shared with you before that I happened upon your site somehow, but am glad I did. I am not yet retired, but always enjoy reading the perspectives of those who have. I am always on the lookout for those with experience.
    My wife and I are planning on retiring within the year. Based on your description, we have an asset level near yours. And again, based on your description, we have needs and wants that appear similar to yours. But the scare mongering is incredible. $1 million is just a base level for some of these folks. They want you to have $2 or $3 million or more. My God, where does it end? Do we all have to be 1/2 way to Bill Gates' net worth before we dare to give up the job?
    I mean, I've saved. I believe I've saved even a bit more than can be prudently expected. I have no wish to spend my golden years dependent upon the kindness of strangers, but at some of the asset levels the Fidelity's, the Vanguards, etc. are saying I need, I could eat filet mignon 2 meals a day!
    Thanks for your writing. I'm glad you take the time.

    1. Tim, your comment fits in nicely with the one just above from David. Those who claim an ever-increasing investment portfolio is needed have a vested interest in that suggestion. And, the reality is if you are disciplined enough to save for retirement, you are certainly not going to blow through it in a silly manner.

      In all likelihood you will not only outlive your money but have some for surviving relatives or a charitable trust, or whatever is important to you.

  3. It is wise that you view your nest egg as lower than what it technically is, Bob. When people look at their assets and what they have to live on, things like homes and other non-financial assets should not be factored in to what is available, for the simple reason that you can't liquidate them as easily as you can, say, stocks and bonds. Yes, a home can be used for a reverse mortgage, but I have never been high on them except in extreme cases, and they oftentimes only serve as another vehicle to enrich the financial industry. Just one man's opinion.

    The $1M figure has become sort of a standard to throw out for a variety of reasons. One is its sheer simplicity; when so many individuals eyes glaze over when it comes to any detailed financial topics, it gave the pundits an easy figure to zero in on. From my own personal perspective it allows people to quickly see that with that amount, using the 4% rule for average withdrawals from that $1M plus the average SS payment, that people will have the average yearly spend of most Americans, namely $50-60K per year.

    Now that I have that out of the way, from my own perspective I am not comfortable with the 4% rule for most people. Until savings and CD rates moved dramatically higher, the average American will not see 4% returns unless they move more aggressively into the stock market, and stay there through the ups and downs. I am not confident most Americans will. Personally I have always been conservative with my thinking towards spending, so our spending from assets is probably closer to 2% or slightly higher. Will this potentially leave us in the end with a decent amount of assets that we could have "enjoyed"? Sure, but there are worst things that could happen than leaving our daughter Jess a goodly amount. Deb and I enjoy our lives a lot, we travel a lot, and have no need to work, so do we really need to spend more? Not really; our lives won't be measurably improved by buying more "stuff", but my mental stress would be elevated as our account levels decrease more rapidly.

    Regardless of what way people choose, I hope for the best for everyone in retirement whether early or not. Life can be a great ride.

    1. I also find the 4% "rule" not always the best choice in our low rate situation. I use something between 3-3.5%. While our present rate of return in probably over 5%, by historical standards that is low. It wouldn't take much (like what happened 10 years ago) to turn things upside down again. 3-3.5% is enough to live well and feel comfortable.

      Reverse mortgages are a tool, but an expensive one that must be used with caution. We bought our last two houses for cash, so obviously we have had 100% equity in each. I would hope I never have to use that equity as an income stream, but if I did I would approach it with caution.

  4. Excellent points, Bob. Another thing that these retirement calculators seem to ignore is the imputed value of Social Security as a lifetime annuity. I've put off claiming my SS until I'm 70, when my monthly payment will be $3,000. If I were to purchase a cost-of-living-adjusted annuity that paid out that amount, it would require a lump-sum investment of about $1.2 million! I used to worry about having less than "the experts" recommend, but now I realize that, with SS combined with my retirement accounts, I have more than enough.

    1. That is a very substantial SS monthly check. Good for you. You are correct: Social Security provides an excellent return on your original investment, if you live long enough! When Betty starts receiving her spousal benefit checks from SS, the amount we withdraw from investments will drop to make up the difference.

  5. There are some relatively simple spreadsheet type calculators that allow you to easily load your income, living expenses, and investments that will show you just how long your money will last. You can create scenarios with different inflation levels, investment returns and tax levels so you can play around with worse case scenario as well.
    You add rows for different spending such as travel or health care just to see how these will impact how long your $$ will last. Using these are a good way to get a feel for how you can spend in retirement. I simply recreated the same spreadsheet my financial advisor uses in his analysis of our situation so we are both using the same tools.

    With a combination living simply and a lot of luck in our planning we were able to retire with all of our day-to-day expenses covered by our actual social security and pension retirement income. We only have to use our investments for extraordinary expenses like abnormal health care or travel. By using the retirement financial spreadsheet we are able to judge we are doing each year and remain both aware and relatively confident of how we are managing the money.

    It has turned out also to be a big benefit in my being able to easily show the wife how we are doing which has made her much more comfortable with our spending plan. As we have children and a grandchild who live overseas it is good to know we can travel and otherwise deal with this situation.


  6. I completely agree with your post Bob. We don't have near 1 million dollars BUT we do have pensions both of us, in addition to Social Security. I know pensions are going the way of the dinosaur but we were both blessed with federal jobs and know we were very lucky.

    1. Yes, those with pensions that are solid and dependable are becoming increasingly rare, especially in the private sector.

      A post of a few months ago generated a lot of comments from those who choose a government job because of the excellent pensions.

  7. A 75 yr old friend never made $40K a year. She lives on about 30% of that at this point- without a safety net. I don't think that as uncommon as people think. Not much to cut when you get to that bone. Saying that, she is enjoying her retirement. She has a small garden, sews, and enjoys her Church. Attitude is everything, right? She feels that she is having a satisfying retirement.

    1. Money does fade in importance, once there is a base level to take care of essentials and an occasional luxury. Attitude is the real currency of retirement.

  8. Rob has no savings but he has a good pension. I have a tiny pension, but I have substantial retirement savings (investments). With our combined incomes we want for nothing, even though we now have a substantial mortgage, whereas prior to moving to our retirement home, we were mortgage free. We live on about 45% of what our income was before I retired, and that percentage would be much smaller if it wasn’t for the mortgage, and if we weren’t still helping out our two youngest children financially. Yet we would be happy living on much less if necessary. Money doesn’t matter a lot to either of us.


    1. Being without a mortgage for the last 14 years has been the most stress-free time of our lives. I can't foresee a time when we would ever take on another one. I'm even hesitant to take on a car payment again, preferring to pay cash.


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