Is $1 Million Enough for Retirement?


For many, $1 million seems like a lot of money. And I would agree. However, what if that $1 million was all you had for living expenses for twenty, thirty, or even forty years? That seems a little more daunting.

Coming off a period of high inflation and stock market volatility, many would wonder if a nest egg of $1 million is enough for retirement. It’s a valid question that doesn’t have a one-size-fits-all answer. However, asking a few questions and applying some proper planning can help determine whether $1 million is enough for you.

Let's start with some general questions to ask when planning for retirement.

It’s generally a good idea to ask yourself some questions as you plan for retirement. Here are a few that can help provide a proper perspective into your situation.

Question #1: What is your vision for your retirement?

One question to ask yourself is, “What am I retiring to?” We often think of retiring as moving away from work and entering into a blissful, endless vacation. However, as followers of Christ, we should find such a vision uncompelling. You may find great value in casting a vision for how generous you would like to be, how you would like to serve the body of Christ in a greater capacity, and how you would like to join God more in his mission to reach a lost world.

Question #2: What are other income sources you might have?

Your nest egg most likely will not be your only source of income. You will need to take inventory of other income streams such as Social Security, pensions, or even continued work from an encore career. These things can supplement your nest egg nicely and reduce the amount you have to withdraw for living expenses.

Question #3: Where will you live?

Not all places are created equal when it comes to the cost of living. Rural Tennessee and New York City look very different in terms of expenses. You’ll need to prayerfully consider where God would have you live out the next phase of your life.

Question #4: What does your tax situation look like?

The types of accounts you have at the time of retirement will largely determine your tax situation. Here are a few of the different kinds of accounts you may have:

  • Traditional Retirement Accounts: Pre-tax dollars, meaning you will have to pay taxes upon withdrawal.
  • Roth Accounts: After-tax dollars, meaning you will not have to pay taxes on withdrawal.
  • Taxable Brokerage Accounts: After-tax, but not a retirement account like a Roth. You pay taxes only on the growth of the assets.

Each has advantages and disadvantages, and all three have a place in retirement planning. However, in most situations, $1 million in after-tax money would likely go further in retirement.

Question #5: How are you saving for retirement now?

As the old adage from Benjamin Franklin goes, “If you fail to plan, you’re planning to fail.” A good place to start is looking at Money Milestone 3, which encourages you to max out your 401(k) or 403(b) match. As you progress through the Money Milestones, you’ll get to Money Milestone 6, which is to contribute 15% toward your retirement.

Download the Money Milestones guide here

Now, let's consider some general principles to keep in mind.

Now that you’ve asked yourself some questions, there are some general principles to consider as you determine whether $1 million is enough. Keep in mind that these are just general “rules of thumb” and may not apply to everyone.

The 4% Rule

This is less of a rule and more of a guideline. The 4% rule is an idea to ensure a safe withdrawal rate over the course of retirement. The calculation is relatively simple: you withdraw 4% of your retirement balance at the beginning of the year. This would come out to be $40,000 per year on a portfolio of $1 million, which could be sufficient when combined with other sources of retirement income.

The 80% Rule

Again, this is more like a guideline than a rule. The assumption is that you would most likely need only 80% of your pre-retirement income. This assumes you’ve paid off all your debt (including your mortgage) and that you’ve reduced other expenses such as retirement contributions or commuting. For example, if you made $100,000 per year before retirement, the 80% rule would say you would likely only need $80,000 per year post-retirement.

More Conservative Investments Over Time

As you approach retirement, diversifying into less-risky assets is generally a good idea. This often means reducing your exposure to stocks and increasing your exposure to bonds, which could make your portfolio less volatile.

What Amount Allows You to Live and Give Generously?

I believe this to be the real question. It’s certainly possible to retire with a nest egg of $1 million, but it’s far more important to consider how God would use you regardless of the size of your retirement account. The size matters far less than our faithfulness with what God has entrusted to us. We see examples in Scripture of both the poor and the rich who were instrumental in advancing God’s kingdom. I’ve seen people with both more and less than $1 million live and give generously and have tremendous Kingdom impact.

As you consider planning for retirement, one thing that can help you be a more faithful steward is to consider working with a Kingdom Advisor. Retirement planning has many moving parts, and a Kingdom Advisor can help you nail down the nitty-gritty details. If you need help budgeting or getting out of debt, consider contacting a Certified Christian Financial Counselor.

About the author: Jon Matlock serves as a financial planner at American Financial Planning, Inc. in Roanoke, Virginia. He is a CFP® candidate, a professional member of Kingdom Advisors, and a graduate of Southeastern Seminary. Before pursuing financial planning, Jon served overseas with the International Mission Board and also worked in their Church Success Center. In his free time, Jon enjoys serving his church, hiking in the beautiful Roanoke Valley, and spending time with his wife and son.