How long will $1 million last in retirement? Strategies and tools to make your savings last longer

A million dollars is a common goal for retirement savings, but with ongoing inflation and spiraling healthcare costs, how long would seven figures actually last?  

Depending on when you retire and whether you're supplementing that income with Social Security, experts say $1 million could provide a comfortable income for anywhere from 15 to 30 years.

"It's really flexible," Brennan Kolar, a D.C.-based senior financial analyst and founder of Atlas CPA Index, told CNBC Select. "You have to look at factors like where you live, what your benefits check is and the market environment."

Understanding those variables can help you estimate how long your savings will last and identify ways you can stretch your retirement income further.

According to Kolar, estimating how long $1 million in savings will last in retirement starts with understanding your current spending habits and then forecasting your future needs.

"What do you expect your expenses to be? Are you a more generous spender in general? Do you have health complications that require you to spend more money? Those are the kinds of things you'd want to think about," he said.

One way to estimate how long your retirement savings will last is to divide your balance by your expected annual withdrawals.

• Formula: Estimated number of years = retirement savings ÷ annual withdrawals.

It won't account for inflation, taxes, benefits, investment growth or changes in spending over time, but it's a good starting point for mapping out or adjusting your retirement strategy. 

"I think a lot of people underestimate how long a million dollars can last, especially if you delay Social Security," Kolar said.

Here's how long $1 million in savings would last for four different people, each with different retirement ages, budgets and Social Security benefits.

One commonly used retirement planning guideline is the 4% rule, which suggests withdrawing about 4% of your investments in your first year of retirement. In subsequent years, you can adjust that percentage to account for inflation with the goal of making savings last roughly 30 years.

Based on the 4% rule, if you had $1 million portfolio, you would withdraw about $40,000 in your first year. The average 65-plus household spends about $61,000 a year. Combining $40,000 a year with the average annual Social Security payout, about $25,000, gets you to $65,000 a year.

While market returns and life changes are unpredictable, "the 4% rule is still a good place to begin," Kolar said. "The figure can go up, actually. I think anywhere from 5.25% to 5.5% is reasonable for today's retirees."

Worried about outliving your savings? An annuity may be able to help

No two retirees will use $1 million the same way, but here are the major factors that determine how long your savings will last.

1. Your spending habits

"You want to be able to spend enough to live the way you're living now, not based on some imagined lifestyle," Kolar said. That means accounting for recurring expenses, including:

• Housing
• Transportation
• Groceries
• Utilities
• Entertainment and dining out
• Healthcare 

Kolar says people can get excited about retirement and forget about healthcare, one of the most expensive aspects. A 65-year-old will spend an average of $185,000 on medical expenses in retirement (or $370,000  per couple), according to data from Fidelity, including deductibles, coinsurance, Medicare premiums and out-of-pocket costs for prescriptions.

"But that's not including long-term care," Kolar added. "If you think you could be in a  situation that requires long-term care, it's important to budget for those costs and explore your options before making any other plans."

He suggests looking up care costs where you plan to age, projecting however many years forward and seeing what your savings will cover.

"Treat the gap as what you're saving or insuring for," Kolar said.

2. When you start claiming Social Security

You can start claiming Social Security at age 62, but your benefits will be reduced each year before you reach Full Retirement Age (FRA). For people born in 1959, the FRA is 66 and 10 months. For anyone born in 1960 or after, it's 67.

• If your FRA is 67 and you start claiming benefits at 62, your maximum monthly benefit would be $2,969.
• If you waited until your FRA, your maximum monthly benefit would be $4,152.
• If you wait until 70, you'd earn delayed retirement credits and your maximum monthly benefit would be $5,181.

The average Social Security check for retired workers who wait to claim until age 70 is approximately $3,131 per month, according to the SSA.

"Delaying Social Security from 67 to 70 increases your monthly benefit by about 24% permanently, because you earn about 8% per year in delayed retirement credits," Kolar said. "So if you're able to do it, I would recommend it."

3. Your life expectancy

The unspoken factor in determining how long $1 million will last in retirement is how long you'll live after you stop working.

"You have to look at life expectancy rates," Kolar said. "If you have no health issues or concerns, and you have no history of family health issues, you can plan for a longer retirement."

According to the National Center for Health Statistics, the average life expectancy in the U.S. for a man in 2024 was 76.5 years. For a woman, it was 81.4 years. Those are average at birth, however: A 65-year-old man in the U.S. can expect tof 83 or 84, according to Social Security actuarial tables, and a 65-year-old woman to about 86 years old.

"I would urge people to be optimistic and give themselves a few extra years of buffer at the very least," Kolar said.

4. Your investment strategy 

How you invest also influences how long your portfolio will last.

"A retiree with a balanced, somewhat conservative portfolio should expect around 5% a year on average, up to 6% with more stock exposure," Kolar said. "That's a long-term forecast — single-year swings can vary. And it's before adjusting for inflation."

When you're younger, you can be more aggressive with your investment strategy because there's time to bounce back from market fluctuations.  As you age, Kolar said, gradually shift your investment mix toward a more conservative one.

"I would recommend a larger share of bonds and conservative stocks in your portfolio as a retiree," he added.

If you retired at 65 with $1 million in investments, your portfolio could realistically last 30 years if you:

• Withdrew 4% ($40,000) your first year
• Earned an average long-term return that exceeds inflation by about 3%
• Waited to claim Social Security until age 70 and received $30,000 per year

Whether you'll have even close to that amount or not, there are several practical steps you can take to make your savings last longer. Small adjustments over time are more effective (and more bearable) than radical changes later.

1. Spend conservatively

Flexibility can significantly improve the longevity of your portfolio. Instead of increasing spending every year:

• Spend less after market downturns and when the Social Security COLA is smaller.
• Delay large purchases if your investments have lost value.
• Spend more comfortably after strong returns.

The 4% rule is a good guardrail, but it's not a guarantee. If you retire early or want an extra cushion, starting at 3-3.5% (about $30,000-$35,000 per year) can increase the odds that your savings last longer.

Kolar also recommends maintaining a cash reserve of about a year's worth of expenses.

"That way, if you're in your early retirement years and the market isn't doing so well, you're not forced to sell off your stocks in the downturn," he said.

2. Maximize guaranteed income

Most people should try to wait until age 70 to claim Social Security, if they can. It permanently increases your monthly benefit. For someone with an FRA of 67, waiting till 70 means about 24% more for the rest of your life. 

If you're married, delaying can also increase the survivor benefit your spouse may receive after your death. 

3. Keep your investments working

Saving enough to have $1 million in retirement is an important milestone, but it's not the finish line. It's just as important to focus on maintaining and even growing your investments after you stop working.

The right mix depends on your risk tolerance, expenses and other available income, but keeping part of your portfolio in stocks can offset inflation over a long retirement. A sample allocation might be 60% stocks and 40% bonds and cash.

Keep track of the fees associated with your investment strategy, since they can add up over time. Charles Schwab offers some of the lowest rates in the industry and commission-free trading with stocks and ETFs. It also has an assortment of mutual funds with no transaction fees.

If you’re new to saving, consider a traditional or Roth IRA with Fidelity. There’s no minimum investment requirement and clients enjoy both top-notch customer service and robust educational resources.

4. Plan for healthcare and taxes

Healthcare is often one of the largest expenses in retirement, but it’s also the hardest to predict. Still, planning for medicare premiums, supplemental private insurance and long-term care can provide a buffer against surprise medical expenses and unexpected withdrawals from your portfolio. 

A health savings account (HSA) allows individuals with a high-deductible health plan to set aside money for qualified medical expenses, from Medicare premiums and hearing aids to diagnostics and surgery. Any unspent money automatically rolls over year after year, even if you change employers, retire or switch health plans.

You may have access to an HSA through your workplace, but you can also open one through a bank like Bank of America, an investment firm like Fidelity or an HSA provider like Lively.

You also want to manage your withdrawals from your investments to avoid income-related Medicare premium surcharges.

Coordinate withdrawals from taxable, tax-deferred and Roth accounts and consider strategic Roth conversions in lower-income years.

If you’re 65 or older, be sure to take advantage of the super-sized standard deduction for seniors.

5. Consider supplemental income

Even a modest income can have a large impact. Earning $15,000 annually for several years can allow you to leave more of your investments untouched, giving them more time to grow.

Once you reach Full Retirement Age (66-67), you can work any amount without it impacting your Social Security benefits.

At CNBC Select, we work with experts who have specialized knowledge and authority based on years of relevant training and experience. For this article, we spoke with Brennan Kolar, a D.C.-based senior financial analyst at Alliance Partners.

Brennan graduated from the University of Pittsburgh in 2019 with a major in accounting and information systems and worked in public accounting as an auditor and consultant. He is also the founder of Atlas CPA Index, an independent platform that evaluates CPA review courses and tracks licensure requirements.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed financial decisions. Every retirement article is based on rigorous reporting by our team of expert writers and editors. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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