How Long Will $3 Million Last in Retirement?

How long $3 million lasts in retirement depends on your spending habits and investment returns. Spending is largely within your control, but healthcare and other unexpected expenses can arise. While past investment returns offer a guideline, future performance can vary. For most people, a $3 million nest egg is likely to support a comfortable retirement. If you need help developing a plan for retirement, consider talking to a financial advisor.

Estimating How Long $3 Million Will Last

Spending levels and investment returns determine how long your retirement savings will last. Here are three scenarios that show how different approaches to spending and investing can affect your retirement outlook.

The Conservative Approach

A 65-year-old couple with $3 million might withdraw 3% of their portfolio, or $90,000, in their first year of retirement, then increase withdrawals for inflation each year. A 3% rate is lower than the typical 4% withdrawal rule, adding a margin of safety. If they estimate a 6% annual return—a conservative figure for a diversified portfolio—they further protect their savings.

A 3% withdrawal on $3 million generates $90,000 for the first year. After adjusting for inflation, this can support a comfortable retirement in most areas. With a 6% return, their portfolio could generate $180,000 per year, assuming steady market performance. Conservative spending and stable investment returns can help retirement savings last indefinitely.

The Middle-of-the-Road Approach

A second couple, also age 65, plans moderate spending and expects to withdraw 4% of their savings in the first year. They allocate more to equities, accepting higher volatility in exchange for potentially greater long-term returns. They project 8% annual investment gains.

This approach provides $120,000 to spend in year one, but $240,000 in projected investment income. With these assumptions, their portfolio should last indefinitely, even with inflation adjustments.

The Aggressive Approach

A third couple, both age 65, plans to withdraw $360,000 per year, or 12% of their portfolio. To support this, they invest aggressively, hoping to earn 10% annual returns, or $300,000 per year.

In this scenario, the couple’s expenses outpace their investment earnings. As a result, they will empty their retirement fund in about 16 years. To make their savings last for about 25 years, they would need to earn a consistent 12% with their investments, which is well above the long-term averages.

Extending the Life of Your Retirement Savings

How Long Will $3 Million Last in Retirement?

To stretch retirement savings, retirees can spend less or increase investment returns. Most people find spending easier to control. Downsizing, relocating to a lower-cost area, or traveling during off-peak seasons are common strategies.

Unexpected costs, such as medical bills, can still disrupt even the best plans and push spending above budget.

The other approach is to invest more aggressively to earn more. This can be done by means of asset allocation, putting a larger percentage of the portfolio into higher-earning assets, especially stocks, instead of safe assets such as bank certificates of deposit that may not even keep up with inflation.

While stock-heavy portfolios have outperformed bonds over long periods, higher returns are never guaranteed and come with more risk.

Other income sources can also stretch your retirement fund. Social Security benefits, pensions, annuities or part-time work can help you maintain your lifestyle and slow the drawdown of your savings.

Consider Living in Tax-Friendly States

One of the most effective ways to stretch a $3 million nest egg is to have residency in the most tax-friendly states. For example, Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming don’t tax any income, including wages, salaries, dividends and interest.

Some states offer more targeted tax breaks for retirees. Alabama, Hawaii, Iowa, New Hampshire and Pennsylvania do not tax pension income. Illinois and Mississippi exclude Social Security, IRA and 401(k) withdrawals from taxable income.

Others offer deductions or exemptions on retirement income, reducing your tax burden even further. These differences can add up, especially for retirees with large withdrawals or several income streams.

Bottom Line

Planning for retirement with a $3 million portfolio opens up a range of possibilities, from conservative strategies focused on stability to approaches that embrace more risk in pursuit of higher returns. How long these savings last often comes down to spending patterns, investment choices and where you live. By considering tax policies, managing expenses and factoring in additional income sources, retirees can shape a financial plan that fits both their needs and their vision for the future.

Retirement Planning Tips

To help you develop a plan for funding a secure and comfortable retirement, consider talking to a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have free introductory calls with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
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