How Long Will $8 Million Last in Retirement?

If you have enough money in the bank to last the rest of your life, you can retire. If you don’t, you can’t. It’s as simple as that, although, of course, nothing about retirement is actually simple. Planning out your retirement means making educated guesses about issues well outside your control, from how the market will play out to how long you’ll even live. But that doesn’t mean this is completely up in the air. How you should plan for your retirement depends on your personal choices, your lifestyle and your spending. You may want to consult a financial advisor to see how much you are going to need to retire.

Spending in Retirement

There are basically two variables when it comes to predicting the longevity of your retirement account: income and drawdown. We’ll get to the income side in a moment, but first, let’s look at your spending. Basically, how much money will you take out of this account every year?

This is where retirement planning gets very personal. It depends entirely on your needs, lifestyle and personal preferences. A few of the most important issues to consider are:

Housing and Location

Where do you live and how much will you need to spend each month on housing? For example, do you live in a home that you own and have paid off? In that case, you can expect relatively low housing costs, likely based on property taxes and periodic maintenance. Or do you rent an apartment in a major city? In that case, you can expect to spend a lot on housing. In fact, it might be the single biggest line item in your budget and it will grow every year.

Medical Care

As you age, medical spending will become an increasingly important part of your lifestyle. As we note below, Medicare will cover a decent portion of this, but the program is far from comprehensive. At a minimum, you should plan on carrying supplemental insurance and long-term care coverage. This will add to your expenses and it’s spending you should plan on.

Dependents and Others

Do you have anyone who depends on you? For example, do you have children or aging parents? Is there anyone in your life who counts on you? Their needs will factor heavily in your budget, so make sure to prepare for that.

Lifestyle

How do you want to live in retirement? In particular, these days travel has become a popular option for retirees. Others like to enjoy sports and other potentially expensive hobbies. No matter what you’re interested in, make sure to account for how much it will cost to maintain the kind of lifestyle you’re interested in.

Early Retirement

If you’re sitting on this kind of money, you may well be considering early retirement. As we discuss below, you certainly have the spending power to do so. While that won’t necessarily change the result, it can completely change the math on your retirement plans. You might need to budget for major life events (like college and new houses) that an older retiree will never face. You will certainly add decades to the length of your retirement and likely the more expensive lifestyle of youth. This isn’t a bad thing, but it’s important to keep in mind.

Inflation and Taxes

Sadly, we must also address less pleasant spending. Over the course of your retirement, inflation will take a significant bite out of your spending power. In general, at the Federal Reserve’s benchmark 2% inflation rate, it takes about 35 years for prices to double. So it’s important to plan on keeping your withdrawals consistent with inflation. At the same time, taxes will take a big bite out of those retirement withdrawals, at the income tax rate or the special lower rate reserved for capital gains depending on how you structure your portfolio. Either way, this will reduce the value of your retirement account.

Investment and Growth

Couple in retirement walking their dog with $8 million in the bank

Retirement accounts are not only about spending. Most retirees move to a more conservative allocation, but they typically keep their money invested rather than sitting entirely in cash. Investments can create growth, helping your retirement account keep pace with spending, taxes and inflation.

The even better news is that, with $8 million, you can maintain all but the most lavish of lifestyles indefinitely. Let’s look at a few very broad investment profiles to see how this would play out.

Cash (Average 4%)

High-yield savings accounts pay more interest than traditional savings but still offer lower returns than long-term investments. These accounts provide security and liquidity, with FDIC insurance covering balances up to federal limits. You can access your money at any time, making it easy to cover unexpected expenses or adjust your withdrawals.

With $8 million in a high-yield savings account, earning, for example, 4% annually, you could generate $320,000 in interest income each year. This interest alone can cover substantial living expenses and may allow you to preserve your principal if your annual withdrawals remain below the earned interest. However, while high-yield accounts help your money grow faster than standard savings, their returns may not keep up with inflation over many years. Over time, the purchasing power of your savings could decline, especially if inflation rises or interest rates fall.

Holding most or all of your retirement funds in high-yield savings accounts can be a low-risk option, but it means giving up the higher growth potential of bonds or stocks.

Bonds (Average 5%)

Many retirees choose to shift much of their portfolio into bonds as they approach retirement, aiming for steady returns with less risk than stocks. Treasury bonds often yield around 4% for long-term maturities, while investment-grade corporate bonds typically offer 4% to 5% annually. These fixed-income investments provide modest growth and help preserve your principal.

With an $8 million portfolio earning an average return of 4% to 5%, you could withdraw $320,000 to $400,000 per year without drawing down your original balance. In this scenario, your account can sustain indefinite withdrawals at that level, making it possible to fund a comfortable retirement while maintaining your nest egg.

Stocks (Average 10%)

Maintaining a stock portfolio adds complexity. If you invest entirely in the S&P 500 through index funds, you can expect an average annual return of about 10% to 12%. Since much of this return comes from capital gains, you may pay lower taxes compared to interest income.

Overall, this would give you far more growth and spending power than with a bond portfolio. In fact, you could withdraw more than $50,000 per month on average ($600,000 per year) and the returns on your account would grow faster than your withdrawals. This would give you an indefinite retirement.

But it’s that “on average” that’s critical. The stock market is volatile. Some years post slower growth and some years even take a loss. To make this strategy work you would need the flexibility to withdraw less money, even none at all, depending on the market year. Ideally, this means keeping a secure emergency fund on hand that you can tap into so that you don’t have to sell depressed assets. If that’s an option for you, then stocks might be the way to go. If not then bonds or diversification are probably better choices.

Social Security and Medicare

The truth is, Social Security and Medicare probably aren’t important to your retirement planning. For most retirees, Social Security and Medicare are key parts of retirement planning. Social Security provides income replacement, while Medicare covers many healthcare costs.

If you have an $8 million portfolio, however, this will almost certainly not apply to you. The average Social Security payment of 1,997 per month simply won’t move the needle on a portfolio that can generate $25,000–$50,000 in monthly income. Similarly, that kind of money is more than enough to pay for top-quality medical insurance even aside from the benefits and guarantees of Medicare.

These programs will add a nice boost to your retirement, at least past the age of 65. Social Security will give you some extra money and Medicare will save you some. Neither, however, is important to the question of whether and when you can retire, as your portfolio will generate more than enough income to pay for a comfortable retirement indefinitely.

Bottom Line

woman cooking in retirement with $8 million

With $8 million in savings, a modestly invested portfolio can fund a comfortable retirement indefinitely. However, everyone’s needs are different. The amount required for retirement depends on your personal goals and lifestyle. Consider your unique situation when deciding if you have enough to retire.

Retirement Planning Tips

This is a strong retirement account and you should be proud of yourself for building it. Now, it’s also important to plan for how you will distribute it after you’re gone because there’s almost certainly going to be plenty left.
A financial advisor can help you build a comprehensive retirement plan. 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 a free introductory call 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.