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RETIREMENT
MARCH 5, 2019

Is $1 million enough to retire on?

Answered by
Debra Greenberg
Director, Retirement and Personal Wealth Solutions, Bank of America Merrill Lynch
"For some people, $1 million in savings, and the annual interest it earns, may be plenty; others might need more. Tempting as it is to put a single number on retirement, the answer to how much you'll need to save really depends on a careful look at the life you expect to lead," says Debra Greenberg, a director in the Retirement and Personal Wealth Solutions at Bank of America Merrill Lynch. "Your retirement plan should reflect your personal goals, where you'll live, what type of home you'll have and the travel or other activities you hope to pursue."
Your retirement plan should reflect your personal goals, where you'll live, what type of home you'll have and the travel or other activities you hope to pursue.
— Debra Greenberg, Director, Retirement and Personal Wealth Solutions, Bank of America Merrill Lynch

Primary factors to consider when determining if $1 million is enough to retire

  • Your current age and the age at which you plan to retire
  • Your expected lifespan, based on family and personal medical history
  • Your post-retirement goals (travel, philanthropy, etc.)
  • Where you plan to live
  • What type of home you'll have
  • Whether you plan to work during your retirement years
Keep in mind your family medical history and the fact that today's longer lifespans may mean more years you'll have to pay for. You don't want to outlive your money. But if you're worried that you don't have enough, don't be discouraged. With a better understanding of your needs, you can review your current savings and expected income and make any necessary adjustments.

How much income could my current investments provide for me?

For a rough idea, the chart below shows the annual income generated from three different "retirement nest eggs." "In addition to personal savings, don't forget to consider additional income you may have from sources such as Social Security or a pension," Greenberg says.
Even if your retirement account looks impressive on paper, the income it generates will need to help sustain you through decades of retirement, when you'll face rising healthcare costs, inflation and unexpected expenses.
The Personal Retirement Calculator, which considers financial and personal information to estimate your income in retirement, can help determine whether you'll fall short of your income needs.
Will your savings be enough for the retirement income you'll need?
You may be surprised how much — or how little — even generously-sized accounts could potentially provide over the course of a retirement. The examples below illustrate how much a 65-year-old can safely withdraw in the first year of retirement.
Savings value at age 65 is $300,000
Annual income from savings, see footnote asterisk, is $12,000/year
Savings value at age 65 is $1,000,000
Annual income from savings, see footnote asterisk, is $40,000/year
Savings value at age 65 is $1,500,000
Annual income from savings, see footnote asterisk, is $60,000/year
Caption: The chart shows how much a person can safely withdraw in their first year of retirement based on how much they have in their retirement savings account when they turn 65. The numbers are adjusted for inflation, and the three examples displayed show a 65-year-old can safely withdraw $12,000 from a savings of $300,000; $40,000 from a savings of $1,000,000 and $60,000 from a savings of $1,500,000.

Looks like I'm not quite where I want to be. How do I close the savings gap?

If the results show a gap, don't panic. That's common, and you have a number of options to help close it. Depending on your situation, you may want to:
Estimating your retirement income needs is not an exact science, and your needs — as well as your vision for retirement — will evolve. No matter your life stage or how much you've saved, a careful review of your expected needs and income can help you prepare for the years ahead.
Ready to get started?
Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.
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