10 Reasons You Won’t Need $1 Million to Retire

Many people believe having $1 million in the bank is a magic number that can allow them to retire. But do you really need that much?

Many factors influence the decision of how much money you need to retire, including the lifestyle you hope to live and whether you plan to retire early.

Yet, many who sit down to crunch the numbers find they don’t need to reach millionaire status to retire after all. Here are 10 reasons why.

Determining how much you currently spend each year is a good starting point for calculating how much you will need in retirement.

Once you arrive at a figure, look at it carefully. How can you reduce costs further? Paying off a mortgage or creating a budget and sticking with it can stretch your savings.

Most Americans who retire can count on Social Security to help provide income throughout the year. That’s going to help you meet your annual spending needs.

The average check from Social Security was around $1,783.55 as of November 2024. The precise amount you earn depends on earnings during your lifetime. Either way, this check should help to fund your lifestyle, especially if two people in the household are getting a benefit.

Most Americans qualify for Medicare at the age of 65. While you may need to purchase additional coverage and policies to compensate for gaps in that coverage, Medicare premiums tend to be reasonable.

In fact, you might pay less for health insurance during retirement than you paid during your working life.

If you exercise, eat right, and take other steps to stay healthy, you increase your odds of avoiding large out-of-pocket costs for health care in retirement.

If you’ve contributed to tax-advantaged retirement accounts — such as a 401(k) or IRA — for many years, chances are good you’ve built a decent-sized nest egg.

That money will provide a stream of income during your retirement years. The longer those funds grow in your retirement account, the longer interest can compound, building value for you.

And if you keep at least some of that money invested in the stock market during your retirement, it should continue to grow.

Pro tip: The more money you save and invest now, the better your odds of retiring in great financial shape. Consider a part-time job or side hustle to earn more money that you can spend during your golden years.

The cash-value component of whole life insurance can help fund your retirement needs. In some cases, this money can be withdrawn tax-free or at low tax rates.

Taking withdrawals this way has potential downsides, so be sure to speak with a tax professional or financial advisor before you do so.

Some seniors may find value in using a reverse mortgage to create a stream of income during their lifetime. A reverse mortgage allows you to borrow money against the value of your home that you don’t have to repay.

If you own your home free and clear, you can establish a reverse mortgage to pay you for the rest of your life at a set rate. Speak with a financial professional before taking the plunge, however, as there are some downsides.

You probably purchased a big, beautiful home when your kids were young. But do you really need all that space now?

If not, selling your home and downsizing to something cheaper might leave you with a profit that amounts to a small windfall. 

If your current home is worth $300,000 and you find a smaller home for around $150,000, that’s more than $100,000 extra that you can spend in retirement.

As you get older, you may not want to commute back and forth to work five days a week. But that doesn’t mean you have to give up on generating any income.

For example, if you downsize your home and use the profit to buy a rental property, you could generate income every month. Or, perhaps you could work a part-time job or develop a side hustle.

As we age, we naturally slow down. Studies have shown that retirees tend to spend less toward the end of retirement than they did at the beginning.

So the income you need at 62 will likely be more than you will require at 82. That might mean you won’t need as big a nest egg as you think.

Almost everybody has had to tighten their belt during a time when expenses have risen, or savings have fallen. So, if you don’t have $1 million squirreled away, you can likely find ways to live on less.

Work to simplify your lifestyle as much as you can throughout your lifetime. That means shifting your priorities away from having all of the finer things in life and toward living a frugal — but perhaps more fulfilling — retirement.

Create a budget that’s focused on reducing spending to see just how powerful it can be for you. Where can you trim back? How can you reduce how much you’re paying in interest on credit card debt?

You might be surprised how little you miss that extra spending once it’s no longer part of your life.

If accumulating $1 million seems impossible, take a deep breath: You might not need to hit that magic number after all.

Create a budget for your retirement years to determine how much you really need. Work to pay off your mortgage and maximize your retirement savings so you'll be in a better position to retire.