You May Need More Than Four Million Dollars To Retire – No Joke!

Want to retire early? You might want to rethink your decision. How much money do you need to retire? I couldn't believe it initially, but you may need $4,000,000 or more to retire... seriously! Find out why on the purposes of this article, I’m assuming you only want to rely on income from your investments to fund your retirement. That means no social security, no pensions or no other outside income.

I’m sure you constantly see articles about retirement and how to save $1,000,000 by the time you retire.

They make it seem like $1,000,000 will be enough to live on for your whole retirement, no matter what age you are today.

The Reality – $1,000,000 Isn’t Enough

Unfortunately, the facts for many people are much different.

Unless you’re planning on retiring today and living on $40,000 a year or less, having just $1,000,000 in retirement savings won’t likely get you through retirement.

Whenever you see these articles, they always state if you start investing at age 25 you only need to invest something like $322 a month at an 8% return to get $1,000,000 by the time you retire at 65. However, you would need to invest $736 a month if you wait until 35, which is over twice as much.

These facts are true and they’re a great example of how important investing early is in relation to compounding returns. It really drives the point home that you need to start investing as young as possible to get the most out of your money.

The problem with these articles is they aren’t telling you to invest enough. They lure you to believe that $1,000,000 is all you need.

Inflation Will Wreck Your Retirement Plans

Sadly, it’s too late to take advantage of compounding when you find out you need more. Depending on how much income you’ll need, you could require anywhere from $2,000,000 to $7,000,000 or more when you retire. It is even harder to hit those marks when you’re already 20 years into your plan and behind when it comes to your current savings.

If you’re 25 today and want to live on $40,000 a year in today’s money, you’ll need a lot more than $1,000,000 when you retire. Why? Inflation.

If inflation averages 3.5% a year (a historical average), then you’ll actually need $3,959,250 to satisfy the 4% rule and live off of $158,370 a year (today’s equivalent of $40,000 a year). Shocking how much 3.5% inflation can change things, eh?

In order to reach the goal of $3,959,250, you’ll need to invest much more than the amount you’d need to get to the big round $1,000,000 number. In fact, if you start at 25, earn an 8% return and inflation is 3.5% (that’s a lot of assumptions), you’ll need to invest $1,274 a month in order to live off of that $40,000 in today’s dollars when you retire.

No Longer Young? It’s A Scary Future

Things get worse if you’re 25 today and you decide to wait until 35 to start investing. If that was the case, you would need to invest $2,913 a month to reach that same goal. If that isn’t a wakeup call, I don’t know what is. You never hear this side of things in the mainstream media.

Assumptions Cannot Be Relied On

The other thing you never hear the big news articles discussing is all of the assumptions they make. The two big assumptions, investment returns and inflation rates, can vary wildly in the future just as they have in the past.

In 1980 inflation was 13.58%! If that happened for a prolonged period of time, you’d have to adjust your plan quickly and invest a ton more to make sure you hit your goal of $40,000 of inflation adjusted income when you retire.

In the 2010, the S&P 500 10 year annualized returns were only 1.41%! Again, that is a huge departure from our 8% assumption. If that happened for a long period of time in the future, you’d have to make adjustments to your plan.

Get Started Today No Matter How Small Your Contributions Are

Planning for retirement income is no easy task. It is extremely important you get started early because the future isn’t certain. It is that uncertainty that you need to get ahead of.

If you haven’t started investing yet, start investing today. It doesn’t matter if you can’t hit your ideal monthly retirement savings goals today. Start with something and work your way up to get to that level. You’ll be amazed how much easier it is to work toward your goal when you actually start working on it.

What do you think about the media’s emphasis on the magical $1,000,000 number? Is it time we accept that we need more than $1,000,000 to retire?

Note: I do think Social Security will be around in some form when I eventually retire decades from now, but it won’t be anything like it is today. That’s why I don’t rely on it in my retirement planning, if it is there when I retire, it will be icing on the cake.

Image by: Ervins Strauhmanis Text added by: Lance Cothern

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About Lance Cothern

Lance Cothern, a Certified Public Accountant (CPA) licensed in the Commonwealth of Virginia, is the founder of Money Manifesto. You can read more about him here or connect with him on Facebook, Twitter, Google+ or Pinterest.


  1. All I know is that I will do the best I can today with what I have. I hope one day to look back and say Phew… I made the right choices. I know we will all be looking back at some point and think.. wow were we ever wrong or right. Then would be a great time to re-visit these posts~ lol.

  2. Retirement is a function of your lifestyle, not income. $1,000,000 is certainly enough if you only let yourself enjoy the actual necessities in life. Yes, this means you aren’t dropping hundreds of dollars on new cell phones every year, or going out to expensive restaurants, or buying $1,500 handbags, etc. If you lead a lifestyle where you aren’t beholden to American-style consumerism, then retirement is much more in reach, at at early age, than most realize. It is THAT point that most of the retirement blogs (including mine) are trying to get across. Retirement does not need to be a proposition that’s only achievable when you’re 60 or older (average retirement age in the United States is now a whopping 62).

    If you live like you are a typical American, then I absolutely agree – $1m probably isn’t enough.

    “Get started today no matter how small your contributions are” – absolutely, positively correct. The faster you start, the faster you get to retire and enjoy a lifetime of true happiness.

    • Steve, unfortunately inflation causes big problems with the amount of money most will need for retirement. If you’re in your 20s today, $1,000,000 won’t be enough unless you have other streams of income when you turn 65. Of course, if inflation was 0, that would work.

  3. Yep, I set the goal of a $4M nest egg baseline a couple years ago. I don’t want to live on a $40k equivalent in retirement, but I know we can and be satisfied if necessary. We are not quite saving the $1200/month, though. Great post!

  4. thank you for the educational article. Investing to keep up with inflation is tough but it must be done! Consistent contributions are the key I believe.

  5. $1,000,000 does seem like a big number to most people who don’t think about money often and don’t understand how the value of money changes with time. Of course, I know some people on the opposite end of the spectrum who won’t feel safe until they have $10,000,000. I agree that people should try and save as much as they can, any little bit helps… but it also helps to really understand how much you truly need, because the number may be less than you think.

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