You probably envision millionaires living in mansions and traveling the world on well-staffed yachts, but a lot of millionaires look just like you and me. They go to a regular job, they have a monthly budget, and they save up for big-ticket purchases.
The truth is, $1 million really doesn’t go as far as you might think these days. And if you’re counting on $1 million to get you through your retirement, you could be in for a nasty surprise.
How much do you plan to spend in retirement?
The lifestyle you plan to lead has a huge effect on how long your savings will last. Someone who lives a quiet life in a home they’ve already paid off is going to have a very different retirement budget than someone who’s traveling the globe. So figuring out your estimated annual retirement expenses is the right place to begin when trying to figure out whether $1 million is enough for your retirement.
The average household headed by an adult 65 or older spends about $47,579 per year, according to the latest data from the U.S. Bureau of Labor Statistics. But that data is from 2020, and as we all know, inflation is driving prices up quickly right now. So seniors will likely have to spend more in the future.
If we assume you have around $50,000 of expenses every year, you could spend $1 million in about 20 years. But there’s a difference between what you’re spending and what you’re paying.
