Can I Retire on 1.5 Million Dollars? Is it Enough for Retirement?

Retiring with $1.5 million can provide quite a comfortable retirement. But what will it get you these days?

What level of retirement income will $1.5 million provide for and how long will it last?

Let’s find out.

Is $1.5 Million Enough for Retirement?

Believe it or not, $1.5 million is enough for retirement! In fact, you can retire with any amount. The amount you retire on will simply dictate the level of financial comfort you have throughout retirement.

But, it’s not the only factor.

There are several factors that will dictate whether or not $1.5 million is enough for retirement. These include:

• Desired Retirement Income – Aiming for a higher retirement income will require a higher capital sum at retirement, because you may need to draw down on part of the capital each year (in addition to the income generated) in order to meet expenses.

• Retirement Age – The sooner you retire, the longer you will need your retirement savings to last and vice versa. Furthermore, the closer to age 67 you retire, the less risk you will have of not having the Age Pension as supplementary income.

• Relationship Status – A single person retiring with $1.5 million will be able to achieve a greater per person retirement income, because the total sum will be theirs to live on. Whereas a couple is effectively using the same capital amount to cover the living costs of two people.

• Comfort with Risk – Lower risk investments provide greater certainty, but are also expected to produce lower long-term returns, which could cause retirement savings to diminish at a faster rate. Higher risk investments provide the possibility for greater long-term returns, albeit with less certainty.

As a starting point, a good retirement planning approach is to start with a desired retirement income, preferred retirement age and your current level of investment risk (and associated return) to see how things are likely to pan out.

Then, the next step is a balancing act to adjust each of these variables until you arrive at a retirement outcome you are happy with.

Related Article: How Much Super Do I Need to Retire?

Let’s take a look at how long $1.5 million will last in retirement based on some assumptions.

How Long Will $1.5 Million Dollars Last in Retirement?

You can retire on $1.5 million dollars and it could last indefinitely if you are comfortable living off the income returns only (i.e. keeping the capital intact).

For example, if you could achieve an income return of 3% p.a., then $1.5 million would provide you with an income of $45,000 per year, indefinitely.

Furthermore, if, in addition to the income return of 3% p.a., your investments had an average growth rate of 3% p.a. (increase in capital value), then your $45,000 per year income could also keep pace with inflation – meaning you could achieve an income of $45,000 per year in today’s dollars, indefinitely.

But, what if you didn’t necessarily want to leave the $1.5 million untouched? How much could you retire on if you were happy to exhaust the total amount?

How Long Will $1.5 Million Last Leaving $0 Behind

When preparing for retirement and putting in place a retirement plan, most people will be happy to use up the large majority of their superannuation and retirement savings.

So, based on this premise, we’ve provided some examples below on how long $1.5 million will last under various scenarios.

Is 1.5 Million Enough to Retire at 50?

You can retire at 50 with $1.5 million dollars and it would provide a single person with an income of approximately $66,000 p.a. until age 100, or a couple with $75,000, based on an investment return of 6% p.a. and inflation of 3% p.a. This assumes full homeownership and eventual eligibility for Age Pension payments.

Is 1.5 Million Enough to Retire at 55?

You can retire at 55 with $1.5 million dollars and it would provide a single person with an income of approximately $70,000 p.a. until age 100, or a couple with $80,000, based on an investment return of 6% p.a. and inflation of 3% p.a. This assumes full homeownership and eventual eligibility for Age Pension payments.

Read Next: How Long Will My Money Last in Retirement?

Is 1.5 Million Enough to Retire at 60?

You can retire at 60 with $1.5 million dollars and it would provide a single person with an income of approximately $77,000 p.a. until age 100, or a couple with $85,000, based on an investment return of 6% p.a. and inflation of 3% p.a. This assumes full homeownership and eventual eligibility for Age Pension payments.

Is 1.5 Million Enough to Retire at 65?

You can retire at 65 with $1.5 million dollars and it would provide a single person with an income of approximately $83,000 p.a. until age 100, or a couple with $93,000, based on an investment return of 6% p.a. and inflation of 3% p.a. This assumes full homeownership and eventual eligibility for Age Pension payments.

Our financial planning firm, Toro Wealth, specialises solely in helping 50 to 70 year-olds optimise their financial position in the lead up to retirement. If you’re interested in learning more about our service and cost, click here.

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