Is a Million Dollars Enough for Retirement?

A million dollars may not suffice for retirement, especially considering inflation and future income needs.

### Is a Million Dollars Enough for Retirement?
* 💰 Many people aspire to be millionaires, but the question remains: is a million dollars **sufficient for retirement**, especially considering **inflation and withdrawal rates**?
* 📉 At a standard 4% withdrawal rate, a million-dollar portfolio yields about **$40,000 annually**, which may not be enough for everyone, particularly as **inflation erodes purchasing power over time**.
* 🔍 For instance, a 55-year-old's million dollars would only be worth about **$744,000** by retirement age, while a 25-year-old's would be equivalent to approximately **$336,000** in today's dollars by age 65.
* 💡 Achieving the first million is significant as it **lays the groundwork for accumulating greater wealth**, with a million dollars still being a **considerable milestone in financial planning**.
* 📊 For a 25-year-old aiming for financial independence, they would need around **$5.7 million by age 65** to replace **80% of their pre-retirement income**, translating to a starting savings goal of about **$130,000 today**.
* 💸 If a 35-year-old wants to retire comfortably, they should aim for a portfolio of about **$4.8 million** by age 65, requiring savings of approximately **$382,000** by that age.
* 🏦 For those in their 40s, accumulating a million dollars is realistic, but to maintain a comfortable retirement lifestyle, they may need to **grow that amount to around $4.5 million** by age 65.
* 📈 Ultimately, while a million dollars is a commendable achievement, individuals must consider their **personal financial goals, inflation, and the need for ongoing savings** to secure a **comfortable retirement**.

Here's a big question: is a million dollars enough? [Music] Brian, I am so excited to talk about this because everyone always aspires to be a millionaire; they want to hit that magical seven-figure status. But the question that everyone has, and a lot

of the trolls in the comments will say to us, is: 'A million dollars is not enough!' Or, 'Why would you even set your sights on a million dollars? That just isn't going to get the job done.' I get it; inflation...

and even if you put withdrawal rates on there—if you do, like, a safe withdrawal rate—I mean, depending on how aggressive you want to be, if you use what's considered an industry standard of around 4%, yeah, maybe a million dollars...

we need to visit that. Yeah, at a 4% withdrawal rate, a million-dollar portfolio could cash flow you $40,000 a year, increasing with inflation. And so the question becomes, 'Well, if I can't live off of $40,000 a year, is that enough?' And even more so,

depending on my age, if a million dollars isn't enough right now, will it even be close to being enough when I get to retirement? We thought it'd be interesting to just show you an exercise of how inflation can erode the value of your dollars through time. I mean, obviously,

for a 65-year-old retiring today, a million dollars is worth a million dollars. But for a 55-year-old, by the time they get to retirement age at 65, a million dollars at that time would only be the equivalent of about $744,000 in today's purchasing power.

dollars and age 45. By the time they get to 65, a million dollars will only be worth a little bit more than $550,000. If you come all the way down to a 25-year-old, by the time a 25-year-old gets

all the way to retirement at age 65, 40 years in the future, a million dollars then would be the equivalent of about $336,000 today. Now, I do want to hit the pause button. I love that we're giving the trolls—they're loving this; they're

like, 'Preach, preach, preach!' But let's hit pause. I still want people to know I have content out there that talks about the value and how hard it is to reach that first $100,000, and that's an achievement in itself because you start building your

army of dollar bills; it starts building upon itself. Let me just tell you, a million dollars is still an incredible achievement, and there's a reason we even did a content—a show—on the milestones you should be trying to reach, and we still kept a million dollars because you

know what doesn't happen without your first million? You don't get to 3 million; you don't get to 5 million without crossing that seven figures. So don't let some troll out there—even the way we've set this up so far—tell you, 'Hey, that's

just a million dollars.'  Just a lot of money? No, it's still a ton of money. We're just going to tell you—let's answer the questions. We have some key questions that I think we should challenge: What is a million dollars? How can it help you?

Let's go into detail on what we want to cover today. Yeah, and I think mutants intuitively get this; you kind of understand this, but a lot of you still have the goal of, 'Hey, I want to hit million-dollar status by age 55, or by 45,'

or by even maybe early on at 35. So, like you said, Brown, we're going to answer some questions: One, if you have a million dollars now, today, are you at the stage where you could take your foot off the gas? Yes. Uh, how about this: If not a

million dollars, if that's not enough, how much do I need in order to be able to retire comfortably when I get to retirement age? Or, if you don't have enough now, what steps do you need to be taking, or how much should you be saving

in order to be able to get there? And so we want to be able to quantify and specify that for you so that wherever you are in your financial journey, you'll understand your path forward. So, for every decade—20s, 30s, 40s, even 50s—we're

going to answer these three questions. I've got to tell you, when we were doing our content meeting, I was just like, 'I can't wait to do this show,' because this is going to answer all of you financial mutants. I want you to strap in; we're

going to load you up, and we're going to look at this in angles that I haven't seen anybody else cover, so I'm kind of excited to hit these. So let's jump right into your 20s. I mean, the 20s is an

Exciting decade because you are young and ambitious, and you have your entire life ahead of you. So what if you happen to be a 25-year-old who all of a sudden had $1 million? First of all, even though we live in this social media world where...

everyone believes that your neighbors make a million dollars a year—if they don't make a million, they make half a million dollars a year—it's just not reality. I want you guys to...

I've got to think it is a rounding error of data on how many 25-year-olds have a million dollars, but we love numbers. We love "what ifs," and we said, "Let's go with it. Let's actually daydream: What is it like for a 25-year-old to have a million dollars at age 25? What does that mean? So...

without doing anything else, if you just had a million dollars today at age 25 and you could earn an annualized 9.5% rate of return between now and the time you get to retirement, by the time you get to age 65, that million dollars could...

have grown into $44 million. But I know what you trolls are out there saying: "Well, $44 million then? What about inflation? We've got to factor that in." Well, even factoring in inflation, do you recognize that at that stage of life, $44 million then would...

feel like $135 million today? That's still a lot of money. I think you could do okay on that, right? If we were again to apply just a safe withdrawal rate to that, that means at age 65, this portfolio could provide for you about $540,000 in annual cash flow.

in today's dollars. So if you are a 25-year-old and you have a million dollars banked right now, yeah, you know what? You're you're on easy street now, right? That's this is a fun exercise; it was a fun thought exercise, but like we

said, that's a rounding error. There's just not a lot of 25-year-olds. If you're out there, you're welcome to reach out to us, but let's let's actually bring this back now. If we've told people, well, 25,

if you had a million dollars, you couldn't quit working, though, even though it's powerful as that. You, you assumed on this; there's a key assumption: a 25-year-old has a million dollars, doesn't need the money until they turn 65, and we just let it grow. But the

reality is somebody might come to it and say, "I'm 25; I want to quit working." That doesn't really work. What does somebody need to be doing if they actually want to be successful? So let's think through this in sort of a case study

format. Let's say that you're 25 years old, and what we did is we said that the median income for our financial mutant—we pulled this from our financial mutant survey—median income for folks in their 20s was somewhere between $50,000 and $100,000 of annual income, so we just

went right in the middle and said, let's assume that at 25 your income is $75,000, and let's assume that over your working career you have a 3% pay raise each year on average. You are going to be an aggressive investor because you're

Starting so early, let's assume you can make 95% on your investments. Then, when you reach retirement at age 65, we'll use a 4% safe withdrawal rate to determine how much you can count on that portfolio.

Providing us with our goal for financial independence, we'll say we want to replace 80% of our pre-retirement income. Now, before you get to retirement, we recognize that it's not income you're trying to replace; it's expenses.

We understand that's how you plan. However, for someone who's 25, they don't know what their expenses will be. So, the best metric for this exercise is to replace 80% of

your pre-retirement income. Let's see how the numbers play out. At age 25, you start with an income of $88,750.  Because of inflationary pressures and pay raises at the rate of inflation each

year, by the time you reach age 65, your terminal working income is about $285,000 a year—pretty respectable. So, if you aim for a portfolio with an 80% replacement ratio of that income,

you would need a portfolio of about $5.7 million by age 65. For a 25-year-old, that's the number you're aiming for. Okay, that number...

The way because if we think about this from an inflation perspective, that doesn't even seem that crazy to me. Because if I had to say what a million dollars meant when I was in the mid-90s, when I looked at a million dollars, I would say right now it's probably somewhere

between $2.25 and $3 million. Is that because of what's happened with inflation in the 30-plus years that I've been out? So this makes sense. That probably in the future, for a 25-year-old, $5.7

million... but what would they need to have today? Because look, for a 25-year-old, you've got 40 years for your money to grow. And I know the power of compounding growth is just exponential, so I bet this number is more digestible than people

probably think. And before we even go there, I want to normalize it because 5.7 sounds like a lot of money, and it is, but this is 40 years in the future. So just to sort of level-set what this means is when you're drawing that 80% of

your pre-retirement income, it's going to be the equivalent purchasing power of $70,000 in today's dollars. So I just want to say we're not talking about like crazy, crazy out-there assumptions; this is a very realistic assumption—a portfolio that would generate $70,000

in today's dollars. So the question you ask is: if I'm 25 and I want to get to $5.7 million by the time I retire, how much would I need saved today? $130,000. Okay, that, by the way—that's still... we had a Q&A show that we recorded...

Early this morning, a 27-year-old couple had a little over $100,000. I was like, "Man, that's incredible!" So, even that's a lot of money. I think the reality is that even most 25-year-olds...

being very self-reflective and transparent, I didn't have $129,000 when I was 25, and I think that will probably be the majority of our audience. So, what is their savings rate? Because I always tell people in the beginning, your savings rate is even more

important than even what you get in rate of return on investments. So, what's the savings rate that would help a 25-year-old? Because they're billionaires of time; they probably can get away with a lot for a little. They certainly can if you

start at zero and your goal is to be able to get to $5.7 million by the time you get to 65, your savings rate throughout your entire working career would need to be about 99.6%. You notice we didn't say

25%, which is what we aspire to; that's what we want you saving because you're starting so early. So, what this means is that in year one, you'd be saving about $700 a month, and then every year as your income increased, you would keep your

savings percentage static at 99.6%. So, for my 25-year-olds, this should get you excited. You should recognize that the future is yours if you can just start saving and putting something away today. Well, I love this number because 10% is very doable. Um, a lot of times...

When you think about it, especially if you have employer matching with your retirement plans and other things, and your income... you've got this knocked out, you're going to hit 10%. But I do want to caution you because a lot of you are going to feel like you've got to get out of jail

free card. It's not 25% like we talk about for all the other decades. Well, that's because I recognize that in your 20s, it's aspirational; you just don't have... you're not in your peak earning years yet. Life is expensive; money's hard to

come by. But do not sleep on this. As you start getting pay raises, I do want you to aspire to and even make movement towards that 25%, because guess what it'll do for you? Every assumption we've got here is that you're working until

you're age 65. If you can actually get aggressive with that savings rate at a young age, guess what you get? You get the option, the flexibility to do things on your terms. And maybe that retirement date, instead of being 65, maybe it's 55,

maybe it's 50. You get to choose your own adventure by investing more earlier. Give yourself that type of flexibility and own your time that much sooner. I love it. All right, Bran. So 25% is a pretty hard charge to hit a million, but maybe you're

someone who is very ambitious. You say, 'You know what? I have a goal. I want to hit $1 million of liquid wealth by the time that I get to 35.' Now, that's still going to be very, very difficult to do, but not outside the realm of possibility.

So, if I do that, what do the numbers look like? Well, if you have a million dollars invested at age 35 and you can earn 8.5% annualized over the course of your working career, that million dollars, without adding another dollar to it, has

the potential to grow to almost $12.7 million by the time you reach retirement age. But we know that $12.7 million then won't be worth the same as it is now. So, if we account for inflation, that means your portfolio would be the

equivalent of about $5.2 million in today's dollars. Man, it is amazing! As we go through these decades, it... it is... I keep saying that $3 to $5 million really is the key number that I think a

lot of people are aspiring to. And I'm noticing a trend here. Just like... I mean, yes, the $13 million is big, but if you... that's... that's future dollars. You can't really pay attention to that because numbers do crazy things when

you get to exponential growth and you've got decades of growth. But if you bring it back to what a person would need in today's purchasing power, I think $5 million for a 35-year-old to know they have 30 years to get there... I bet this is going to feel

a little more doable than most people even realize.

Yeah. What's wild is if we just applied, you know, a 4% withdrawal rate to that $5.2 million at age 65, that could provide you with $208,000 a year in today's dollars.

Talking about a very healthy retirement lifestyle, a very healthy cash flow in retirement. That's if you can get to a million dollars by the age of 35. Most Millennial financial mutants—by the way, a lot of you work with us and

we are just so thankful to have you—but I still want to put it under the lens of myself. You guys know I had several goals: I wanted to make six figures by the time I was 30, and I wanted to be liquid—seven figures liquid—by the time I

was 40. I didn't reach the 40 number. I'm just being honest with you guys. I did have a net worth over seven figures, but if I was looking at just retirement assets, investment assets, I didn't reach that goal. So I still

think this is very aspirational. Not many 35-year-olds have a million dollars, so we need to show them what it looks like if you really are trying to figure out what you need if it's not a million dollars. So again, let's look at a very

similar case; let's say that you're 35 years old, let's say you're now at this part of your career making $100,000 a year. We're again going to assume that your salary increases on average about 3% per year to keep up with inflation,

we're going to assume your rate of return is 8.5% between now and retirement. We're going to use a 4% safe withdrawal rate when you get to age 65, and again our goal is going to be an income replacement of 80% of your

pre-retirement income because we don't know what your expenses are going to be. There's still so much life to happen, so we're going to shoot for a high income replacement ratio.  What this means is that if at age 35 your income is $100,000, by the time you

get to age 65, your income will have grown to be about $243,000 a year. Again, our goal is going to be able to replace 80% of this number. So, in order to do that, by the time this 35-year-old gets to age 65, they

will need to have accumulated a portfolio worth about $4.8 million. It is amazing how it comes back to—it really does. And what I like is, like I said, we have 30 years for somebody who's 35 right now watching

this and say, 'Well, what would I need to be at right now because I don't have a million dollars?' You—you guys showed that a million dollars at 35, but that's still so aspirational, that's such a hard goal to reach. What would somebody who's

actually really been trying hard, been saving, been prioritizing saving for the future—what would it take right now at 35 without another dollar to get there? If you, at 35, have saved and invested $382,000, without saving another dollar, without putting any more into the pot,

that $382,000, if it can grow at 8.5% annualized, has the potential to turn into $4.8 million by the time that you get to age 65. $382,000—again, still difficult, but not impossible by the time

that you get to age 35, but don't worry if you've just started watching this, because I realize there's a lot of research and it depends on what year I pull the data from. For a few years, the data was around age 33, but I think most recently,

and it's probably because of some inflation and the cost of living, it has been age 36 for a lot of people that they actually discover investing somewhere in their mid-30s. So a lot of you are probably just now finding the Money Guy Show, and you're saying, "Hey, I want to turn on the ability for my army of dollar bills to work harder than I can with my brain, my back, my hands. How do I do this? And where do I start?"

or, give—we've done the research for you. Even if you're starting at zero right now and you're age 35, you can still reach these goals with what savings rate? If you can save 24.1% of your gross income and you can stick to that savings percentage for

your entire working career, even starting at 35, you still have the ability to build a portfolio worth $4.8 million by the time that you get to age 65. Now, I think this is where hopefully you guys are starting to see that there's

something beyond—beyond just us trying to motivate you. We're actually pretty nerdy; we've put the math behind it. That 25% savings rate that we tell you guys—by the way, if you make under $200,000 as a married couple, $100,000 as a single

Individuals, you get to count your employer match in that number. Um, you can quickly see that it's tied to numbers; it's tied to the math. That's why I also encourage you to go to money.com.  We have a resource: 'What will 25% do for you?' and it

is a very powerful tool because maybe you're not perfectly 35; maybe you're 32, maybe you're 41. Go check out that resource so you can kind of figure out what savings rate, your age, and the power of time can do for you. Again, for someone

at 35, they have a $100,000 income. This means that in the first year they're saving about $2,000 a month, and then that number increases as their salary goes up through time. Again, that's basically maxing out your 401(k); that

would be the equivalent of someone doing that. So if you can do that, even starting at 35, you can set your future financial self up for success. And that's why we tell you to shoot for 25%, because there's a really good chance for folks

that are in their 20s and their 30s: a lot of life hasn't happened for you yet. You may be in the messy middle or about to go into the messy middle. You don't know what your future health is going to look like, your lifestyle, your income,

your career, your location. So if you can start early and if you can save consistently, there's a really good chance that when those unknown unknowns come your way, and you've done the hard work early on, you will be able to push through that and still reach the

financial goals you have as your life begins to take shape, but I also want to take the coach's power here and tell you to stay motivated.  The fact is, I know in the messy middle there are a lot of chances when you're short on

time, you're short on money, you've got the kids, you've got your career obligations—all these things are pushing hard on you. It's easy to say, "I need relief and I'll just take this period of time off and come back later." Don't do it! I

make really hard decisions on how you live your life, where you live, what type of car you drive, because you'll never, ever, ever get those 30s back. You can't get your 20s back; you'll never be able to get your 30s back. Don't sleep on

this very important time, because the wealth multiplier of what every dollar has the potential to become is still super strong in your 30s. All right, Bri, let's now talk about the 40s. A lot of folks—a lot of folks have said, "You know what, by

the time I get into my 40s, I want to be a liquid millionaire." I mean, this was even one of your goals that you laid out, and we know studies have shown that most people cross seven-figure status somewhere in their late 40s. So I think

this is, in reality, a realistic option for folks in their 40s to get to a million dollars. So the question becomes, is it enough? Yeah, I was pretty excited about getting to my 40s because it's—it's kind of like when I...

I love "The Millionaire Next Door," but when you see the book's whole wealth calculation or what your net worth should be, I've always said it's not really fair for a 20-something or 30-something to use that millionaire calculation. That's just not the reality of where people are at that age.

When we've done this for 20-somethings and 30-somethings, it was definitely more aspirational—shooting for the moon, more like what you'd see on Instagram than what you'd see on the "Money Guys" show. But now that we're in the 40s, I think this is the decade where you can realistically expect to see seven-figure status.

I don't think this number is going to be as crazy as, like, the 20-something's number—close to $4 million. In your 40s, you'll see it's a lot different. If you've been able to accumulate a million dollars by the time you get to 45 and you can earn a 7.5% return on your investments for the rest of your career...

...that million dollars, without adding another dollar to it, has the ability to turn into almost $4.5 million. Just so you know, $4.5 million 20 years in the future will feel equivalent to $2.5 million today. And $2.5 million today is still a very healthy retirement portfolio.

If we applied a 4% withdrawal rate to that sum of money, this means you could count on a healthy cash flow.

Flow from your portfolio of just under $100,000 a year in today's dollars. You remember how, earlier, when I was—I can't remember, it was in the 20s or 30s—I was talking about that when I graduated college in the mid-90s and I

read *The Millionaire Next Door*. The whole goal of a million dollars was just so powerful to me, but now I feel like it's changed a little bit. It's somewhere between $2 and $2.5 million to probably $3 and $3.5 million, and I think it's very telling

that right now, if you do—if you've reached this at age 45 and did absolutely nothing else—you're going to have the equivalent of that $2.5 million, or $100,000 a year for the rest of your life. That's pretty successful. So, but

let's say that you don't want to just stop now. You say, 'Okay, I want not just a general plan that tells me a general idea; I want something a little more specialized.' Let's look at a case study. Let's assume that you are 45 years

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The Money Guy Show

Is a million dollars enough? Initial discussion of the question and its relevance.

The question of whether a million dollars is sufficient is posed, considering the aspiration of becoming a millionaire.

Counterarguments suggesting a million dollars is insufficient due to inflation are addressed.

A 4% withdrawal rate from a million-dollar portfolio yields $40,000 annually, raising the question of its sufficiency for living expenses.

The impact of age and inflation on the future value of a million dollars is highlighted.

An exercise demonstrating inflation's effect on the purchasing power of a million dollars over time is proposed.

Importance of achieving a million dollars as a milestone.

The importance of achieving the first $100,000 and the significance of reaching a million dollars as a stepping stone to greater financial success is emphasized.

A million dollars is still considered an incredible achievement, serving as a foundation for accumulating further wealth.

The importance of not being discouraged by negative comments and focusing on the significant value of a million dollars is stressed.

Analyzing the value of a million dollars at different ages and stages of life.

The discussion shifts to analyzing the value of a million dollars at different ages and financial goals.

Questions about the sufficiency of a million dollars for retirement at different ages are addressed.

The discussion covers necessary steps and savings amounts to achieve financial independence at different ages.

The analysis will quantify and specify the path forward for individuals at various stages of their financial journey.

Case study: A 25-year-old with a million dollars.

A hypothetical scenario of a 25-year-old possessing a million dollars is presented.

With a 9.5% annual return, a million dollars could grow to $44 million by age 65, even considering inflation.

A 4% withdrawal rate on this portfolio could provide $540,000 in annual cash flow.

The unrealistic nature of a 25-year-old having a million dollars is acknowledged, shifting the focus to realistic saving strategies.

Realistic savings plan for a 25-year-old aiming for financial independence.

A case study outlines a realistic savings plan for a 25-year-old with a $75,000 annual income, aiming for 80% income replacement at retirement.

The goal is to replace 80% of pre-retirement income, considering the uncertainty of future expenses.

By age 65, the projected income is $285,000, requiring a $5.7 million portfolio for 80% replacement.

The perspective of inflation's impact on the value of a million dollars over time is discussed.

To reach $5.7 million by age 65, a 25-year-old needs to save approximately $130,000 today, requiring a 99.6% savings rate.

Case study: Aiming for a million dollars by age 35.

A scenario of aiming for $1 million in liquid wealth by age 35 is explored.

With an 8.5% annual return, a million dollars at age 35 could grow to almost $12.7 million by age 65, equivalent to about $5.2 million in today's dollars.

A 4% withdrawal rate on $5.2 million at age 65 would yield approximately $208,000 annually.

The presenters share their personal experiences and goals, highlighting the aspirational nature of these targets.

Case study: Realistic savings plan for a 35-year-old.

A case study analyzes a realistic savings plan for a 35-year-old aiming for financial independence.

A 35-year-old earning $100,000 needs to accumulate about $4.8 million by age 65 to replace 80% of their pre-retirement income.

To reach $4.8 million by age 65, a 35-year-old needs to have saved approximately $382,000 today.

Starting at zero at age 35, a 24.1% savings rate is required to reach $4.8 million by age 65.

Case study: Aiming for a million dollars by age 45.

The discussion shifts to individuals aiming for a million dollars by age 45.

A million dollars at age 45 could grow to almost $4.5 million by age 65 (equivalent to $2.5 million today), providing a healthy retirement income.

A 45-year-old earning $125,000 needs approximately $4.5 million by age 65 for 80% income replacement.

To achieve this, a 45-year-old needs about $1,122,000 saved today, while a 57% savings rate is required if starting from zero.

Alternative scenarios with higher savings rates are presented for those with existing savings or higher income.

Case study: A 55-year-old with a million dollars.

The scenario shifts to a 55-year-old with a million dollars.

A million dollars at age 55 could nearly double to $1.9 million by age 65 (equivalent to $1.4 million today), yielding about $57,000 annually.

A 55-year-old earning $150,000 needs about $4 million by age 65 for 80% income replacement, requiring approximately $2.1 million at age 55.

The importance of continued saving even after reaching significant milestones is highlighted.

Conclusion and resources for personalized financial planning.

The presenters encourage viewers to use the provided resources for personalized financial planning.

The "Know Your Number" course at learn.money.com is promoted for personalized financial planning.

Additional resources at money.com/resources are mentioned.