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

With a little flexibility, you might need less money during your golden years than you think.

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Updated May 28, 2024
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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?

Numerous factors play a role in 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.

You might spend less than you think

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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.

You can rely on Social Security

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

The average check from Social Security was around $1,550 as of October. 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.

Your health insurance could be lower

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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.

And if you exercise, eat right, and take other steps to stay healthy, you increase the odds of avoiding having to pay large out-of-pocket costs for health care in retirement.

Your retirement savings will keep growing

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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 to take advantage of 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 as a way to make more money that you can spend during your golden years.

You can tap into whole life insurance

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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.

There are potential downsides to taking withdrawals this way, so be sure to speak with a tax professional or financial advisor before you make any withdrawals.

You might qualify for a reverse mortgage

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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 about the pros and cons of reverse mortgages before taking the plunge, however, as there are some downsides.

You can save money by downsizing

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When your kids were young, you probably purchased a big, beautiful home. 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.

You can start a side hustle

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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.

You'll likely spend less as you age

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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 is likely to be more than you will require at 82. That might mean you won’t need as big a nest egg as you think.

You can learn to live on less

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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, it’s likely you can 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 being able to live 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? What can you do to 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.

Bottom line

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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 reduce your expenses now so you'll be in a better position to retire.

Author Details

Sandy Baker

Sandy Baker is a has over 17 years of experience in the financial sector. Her experience includes website content, blogs, and social media. She’s worked with companies such as Realtor.com, Bankrate, TransUnion, Equifax, and Consumer Affairs.