Reaching $1 million in retirement savings can feel like a major milestone, especially after decades of saving and investing. But as retirement gets closer, the question changes from “How much have I saved?” to “Is this enough to support the life I want for the next 20 or 30 years?”
So, how long will $1 million last in retirement? There isn’t one number that applies to everyone. Your spending, investment strategy, taxes, withdrawal rate, and inflation will all influence how far that money goes, which is why a seven-figure portfolio can support very different retirements for different people.
In this article, I walk through the factors that have the greatest impact on your retirement savings and what you can do to help your money keep pace with the life you’ve worked so hard to enjoy.
How $1 Million Shrinks in Real Terms
It may not seem like the value of your money shrinks dramatically from one year to the next, but over the course of multiple decades, inflation’s impact on purchasing power can be significant.
If you start with $1 million, here’s how much that sum would effectively shrink over 20 years, depending on inflation rates:
- 2% Average Inflation: $672,971.33 (in today’s purchasing power)
- 2.5% Average Inflation: $610,270.94
- 3% Average Inflation: $553,675.75
Of course, your savings are not sitting in a shoebox. A retirement portfolio keeps working after you stop working, and investment growth offsets some of what inflation takes away. The complication is that you are also withdrawing from that portfolio to live on. Growth must cover your withdrawals and keep pace with rising prices, which is a harder assignment than growth alone. Many pre-retirees look at a long-term average return and assume it comfortably clears that bar. Once you factor in annual withdrawals, the margin is narrower than it appears.
Seeing these numbers in black and white can be startling. No one wants to hear that their money could lose almost 40% (or even more) of its purchasing power over two decades.
When you combine that with the reality of future inflation, you can see how a retirement that felt comfortable at 65 might feel tight at 85. The spending plan that worked beautifully in your first decade may not stretch as far in your third.
Taxes Matter Too
If your savings are in a 401(k) or traditional IRA, you have a silent partner in that account. Every dollar you withdraw is taxed as ordinary income, so the balance on your statement and the amount you can spend are different.
Here is a hypothetical illustration, not a real client situation. A retired couple withdrawing $80,000 a year from a traditional IRA, with Social Security income on top, could land in the 22% federal bracket. What reaches the checking account is meaningfully less than the $80,000 that left the account. Repeat that across a 25-year retirement and the cumulative difference is large.
Taxes also interact with other parts of retirement in ways people do not anticipate. Larger IRA withdrawals can increase the portion of your Social Security benefits subject to tax. Those same withdrawals can push you past the income thresholds that determine your Medicare Part B and Part D premiums two years later, a surcharge called the Income-Related Monthly Adjustment Amount, or IRMAA for short.
Required minimum distributions add one more layer. Beginning at age 73 (75 if born in 1960 or later), the IRS requires you to take a set amount out of your pre-tax accounts each year whether you need the money or not. For savers who were especially diligent about funding their 401(k), those forced withdrawals can arrive in years when the extra income is unwelcome.
This is where the order of your withdrawals starts to carry real weight. Which accounts you draw from, and in which years, can change your lifetime tax bill considerably.
Why Healthcare Is a Wild Card
Historically, medical inflation has outpaced the general Consumer Price Index (CPI). Employer health plan cost surveys have shown annual increases between 5%-6%, running well above general inflation, and healthcare is one of the few expense categories that tends to grow as you age rather than shrink.
Many soon-to-be retirees underestimate the cost of future healthcare. The 2025 Milliman Retiree Health Cost Index estimates that a woman retiring at 65 may need to spend as much as $313,000 in remaining medical costs. A man retiring at 65 may need to spend as much as $275,000.
Another Hazard: Sequence-of-Returns Risk
The order in which your investment returns arrive is as important as the returns themselves, and this is one of the least understood risks facing new retirees.
Here is a hypothetical illustration, not a real client situation. Two retirees each begin with $1 million, and each withdraws $90,000 a year to live on. Across 25 years, both earn the exact same average return. The only difference between them is timing. The first retiree sees strong markets in the early years and a downturn much later. The second retiree runs into a downturn in years one through three, right after leaving work.
The second retiree ends up in a far worse position, and the reason comes down to arithmetic. When the market falls, that $80,000 withdrawal represents a much larger slice of a shrunken account, and funding it requires selling more shares at depressed prices. Those shares are permanently gone. When the recovery eventually arrives, there is considerably less money left in the account to benefit from it.
While you were still working, a falling market was uncomfortable to watch, but you were not selling anything, so the recovery repaired the damage. Once withdrawals begin, a poor market in the first few years leaves a mark that later good years may not fully undo.
What Can You Do About It?
Thinking about the decline in future purchasing power is enough to make anyone anxious. The good news is you aren’t powerless. Here are a few tangible steps you can take to safeguard your savings:
- Work with an advisor to stress-test your current plan with different inflation scenarios.
- Include accounts with different tax treatments in your plan.
- Include healthcare costs as an intentional part of your plan.
- Think carefully about your withdrawal rate.
That last step is particularly important. The old 4% withdrawal rule is far from universal, and many professionals now consider it to be outdated.
Find Out How Long $1 Million Will Last in Your Retirement
Retirement should give you more freedom, not leave you constantly wondering whether your savings will hold up for the years ahead. Have you found yourself asking, “How long will $1 million last in retirement?” The answer depends on much more than your starting balance.
As a fee-only financial advisor, I look at retirement income, taxes, spending, and long-term goals together to help you understand what your money can realistically support. At Tapparo Capital Management, we build a plan around the retirement you actually want to live.
About Andy
Andrew Tapparo is a fee-only financial advisor at Tapparo Capital Management, a financial planning firm in Topsfield, MA. As a Retirement Income Certified Professional (RICP®), he designs retirement strategies along with sound money management to help clients retire with confidence.
