How Long Will $1 Million Last in Retirement?

Planning for retirement is a big decision. If you’re a small business owner or an individual asking how long $1 million will last in retirement, you’re not alone. A million dollars used to mean financial security. But inflation, interest rates, and lifestyle choices now play a big role in how long it lasts.

Key Factors That Impact How Long $1 Million Will Last in Retirement

1. Inflation and Rising Costs

Inflation reduces buying power over time. As of 2025, the U.S. inflation rate is 2.9%. Over 20 to 30 years, even small inflation increases can make a big difference in your expenses. Housing, food, and healthcare costs will continue to rise, so it’s essential to plan for these increasing costs.

2. Investment Returns and Interest Rates

Interest rates and market returns affect how much your savings grow. The Federal Reserve’s rates are between 4.25% and 4.5%, which impacts bond yields and savings accounts.

• Stock Market Returns: The S&P 500 has historically returned 7%–10% annually after inflation, making it a strong long-term option.
• Bonds and Fixed Income: U.S. Treasury bonds provide steady returns of 4%–6% for low-risk investors.
• Annuities: These offer guaranteed income, but come with fees and restrictions.
• Real Estate Investments: Owning rental properties or REITs (Real Estate Investment Trusts) can provide additional cash flow to support retirement income.

How Long Will $1 Million Last?

The 4% Rule: A Standard Retirement Strategy

Many experts follow the 4% rule, which means withdrawing 4% of savings each year and adjusting for inflation.

• First-year withdrawal: $40,000
• Year 10 (with 2.9% inflation): ~$51,800
• Year 20: ~$68,000

Using this method, $1 million could last 30 years or more, assuming steady returns.

A More Conservative 3% Withdrawal Rate

A 3% withdrawal rate is a safer choice for those concerned about running out of money.

• First-year withdrawal: $30,000
• Year 10: ~$38,900
• Year 20: ~$51,000

With this strategy, $1 million could last 35+ years.

What Happens if You Withdraw More?

Withdrawing 5% or more per year makes your savings disappear faster.

• First-year withdrawal: $50,000
• Year 10: ~$64,800
• Year 20: ~$85,000

At this rate, your savings might last only 20-25 years, which is risky if you retire early.

Other Key Considerations for Small Business Owners and Individuals

1. Healthcare and Long-Term Care

Healthcare is a major retirement expense. A 65-year-old couple may need $315,000 or more for medical costs. Long-term care can cost over $100,000 per year. If you develop a chronic illness or require assisted living, these costs can rise significantly.

To protect your savings, consider:

• A Health Savings Account (HSA) to cover future medical costs.
• Long-term care insurance to help with nursing home expenses.
• Medicare planning to maximize coverage while minimizing out-of-pocket costs.

2. Social Security and Passive Income

Social Security helps stretch your savings. The average benefit in 2025 is about $1,900 per month ($22,800 per year). However, delaying Social Security until age 70 can increase benefits by 8% per year, helping secure more income in later years.

Other sources of passive income can supplement your retirement:

• Rental properties can provide consistent monthly income.
• Dividend-paying stocks offer passive cash flow.
• Online businesses or royalties from books, courses, or patents can generate extra money.

3. Market Fluctuations and Risk Management

Market downturns can hurt withdrawals. Keeping a cash reserve or reducing withdrawals during downturns can protect your savings. Diversification also helps spread risk across different investments.

Other strategies include:

• Maintaining 1-2 years’ worth of cash reserves for downturns.
• Using a bucket strategy, where short-term needs are in cash, mid-term needs in bonds, and long-term growth in stocks.
• Adjusting spending based on market performance.

Lifestyle Choices and Budgeting in Retirement

Your lifestyle greatly affects how long your money lasts. Some retirees travel often, while others live a simple, budget-friendly life.

Ways to make your money last longer:

• Relocating to a lower-cost area where housing and taxes are cheaper.
• Cutting unnecessary expenses like luxury goods and high car payments.
• Taking advantage of senior discounts on travel, dining, and entertainment.
• Part-time work or freelancing to supplement income.

Final Thoughts: Will $1 Million Be Enough for Your Retirement?

The answer depends on your lifestyle, spending, and investment choices. If you follow the 4% rule, $1 million could last 30 years or more. But inflation, healthcare, and market changes may require adjustments.

Small business owners and individuals should diversify income sources and review financial plans regularly. A financial advisor can help you create a strategy so your $1 million lasts as long as possible in retirement.

Managing money can feel overwhelming, especially for small business owners and individuals juggling expenses, savings, and investments. But with the right personal wealth management tips, you can take control of your finances and build long-term security.

As a business owner, do you know about the EIN and how can you apply for it for your business? Read about it here and follow the IRS guidelines and set your business up for success by applying for an EIN today!