Is $1.5 Million Enough To Comfortably Retire Off? (Analysis)


People often say that if you have a couple of million dollars saved up for retirement, you should be good to go.

But is that really enough? Sure, it’s more than the average person has saved, but is it sufficient to cover your expenses and last for 30 years or more? 

A lump sum of $1.5 million should be more then enough for an average person’s retirement needs. Not only is it enough to support your previous living standards and continue paying your bills, but it should allow you to live in some of the best U.S. cities.

But of course, this is a very blanket statement, and not every lives within the same standard of living. One thing that is constant for just about everyone though is some level of inflation.

Inflation has led, and will continue to lead, to an increase in the cost of living for Americans. It’s no secret that $1.5 million isn’t as much as it used to be a few years ago. As inflation goes up, our purchasing power goes down.

But let’s stick to the question at hand here. The next part of this article further discusses what it looks like to retire comfortably on $1.5 million.

Can You Retire Comfortably With $1.5 Million?

Most American’s should be able to retire comfortably with $1.5 million and still keep living the way they’re accustomed to in retirement. Assuming an annual return on investment of between 4% – 8%, 1.5 million will payout an annual amount ranging between $60,000 to $120,000. 

Related Financial Geek Article: Is $100k a Good Salary? [In the US]

But again, this all depends on things like your tolerance for risk, your rate of return and the state you live.

Several other factors can also determine what is “enough” to live comfortably during retirement.

For instance, what kind of lifestyle did you have during your working years? Will $60,000 – $120,000 a year keep you at the same income level you’ve grown accustomed to? Or will you be taking a big pay cut after you stop working?

These are all questions you need to ask yourself.

Because remember, people have different living standards and therefore require different income levels to live on comfortably.

And even though $60,000 – $120,000 is a lot of money, there are several other determinants that come into play when determining how much will actually be enough. 

They include:

  • Your desired lifestyle
  • Average costs of living in your desired area
  • Financial status, such as debts, loans, or mortgages.
  • Monthly expenses
  • Life expectancy

Some expenses are likely to reduce in your old age, so remember to keep that in mind as well.

For example, car and mortgage payments might not weigh you down in your 70s and 80s like they would for someone more middle aged.

However, it’s not all gravy as you get older. One expense that unfortunately may skyrocket as you age is the cost of health care. 

It doesn’t take a genius to realize that with old age comes exposure to disease, falls, and accidents, translating to higher expenses. With that said though, if you do have a separate healthcare insurance plan, this shouldn’t be a major problem, but again – it’s something to factor in. 

Is $1.5 Million Enough to Retire at 60-65 years?

A recent study by Visual Capitalist shows that $1 million for retirement is enough of a nest egg for an average person in the US to retire on.

So, if we use that study as a frame of reference, it’s fair to safely assume that $1.5 million would be enough to retire off at the age of 60 or 65.  But of course, this depends on factors like life expectancy, area of residency, daily spending, your health, and how much you intend to leave behind for inheritance.

So before answering this question for yourself, make sure you keep some of these factors in mind.

And as previously mentioned, remember that the rate of inflation and the cost of healthcare might seriously impact and affect some of your purchasing power as your travel through your retirement years (no pun intended hopefully!).

How Long Can a $1.5 Million Sustain You During Retirement?

$1.5 million can last you several years during retirement if you’re smart with it, and of course it also depends on where you live and your desired lifestyle.

Life in some cities is expensive, and $1.5 million won’t last as long as it will in other cities. 

A $1.5 million retirement plan will sustain you for around 10-25 years in expensive cities and around 20-35 years in the southern towns where life is less expensive. This means if you retire at 65 and live in places like New York, your money will sustain you through your 70s and early 80s.

But that’s different for a person retiring at 65 and living in southern states like Arkansas where the cost of living is much more cushioned compared to New York.

The same amount will likely sustain them through the 70s, 80, and probably into your mid-90s without a problem.

Let’s do the math based on the essential expenses, such as annual rent, transport, food & groceries, healthcare, and utility bills.

$1.5 Million in New York

ExpensesCosts
Annual rent$44,208
Transport$1,524
Food & groceries$4,942
Healthcare$12,530
Utility bills$3,276
Sources Hyperlinked

In this case, $1.5 million would last 22-23 years.

$1.5 Million in Arkansas

ExpensesCosts
Annual rent$8,940
Transport$3,848
Food & groceries$2,988
Healthcare$4,932
Utility bills$4,659
Sources Hyperlinked

In Arkansas, $1.5 million would last more than 30 years.

Quick Note: These costs do not reflect the actual exact state of affairs in the mentioned states as many more costs are involved based on your lifestyle, medical condition, and other factors. The purpose of these tables is to more so give you an idea on how living in different states can drastically impact how far $1.5 million can take you.

Are you a Canadian reading this article wondering how the heck these numbers help you? If so, I’m sorry, and while I don’t have an exact article like this looking at the cost of living in each province, I did write an article called Retire Early as a Canadian | 15 Tips and Tricks that I think you’d enjoy!

Final Thoughts

A $1.5 million retirement plan is definitely a good amount for someone with an average to moderate lifestyle.

Especially if you properly budget and generate anywhere from a 4%-8% ROI each year. And if that’s the case, well then a $1.5 million pension plan can sustain you for as long as you need it too without actually touching the principal, which when you die can then get passed onto your loved ones as inheritance.

But let’s not talk about death yet! You got a lot of life left to live!

So make sure you budget your money properly, make smart, low risk investments and live a life that you can truly afford.

Geek, out.

Noel Moffatt

Noel Moffatt is the founder and main contributor for his blog - The Financial Geek. Based in Canada, Noel's passion for personal finance has helped him amass over 300k readers to his Financial Geek blog.

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