Can you retire on $3 million?

Is $3 million enough to retire?

In short, yes. If you’ve managed to gather $3 million to fund your retirement, this should be more than enough to see you through in most cases. 

Many Americans believe they need over $1 million in savings to retire comfortably. So if you've managed to save three times this amount, you're in an enviable position in the eyes of most Americans.

If we examine $3 million in isolation and disregard for now how it could grow through interest and investment, we can see that $3 million over 40 years translates to a generous $6,250 per month.  

While this is a substantial amount, to properly determine whether this money is enough for you, we recommend asking yourself the following questions: 

• What will my retirement lifestyle and resultant monthly outgoings look like? The more lavish a lifestyle you lead, the more money you’ll need as a retiree. Sit down with your existing data and calculate what you’ll likely spend each month when you retire. You’ll soon see whether the numbers match up. 

• How many years do I plan for my retirement income to cover? The sooner you retire, the more time you’ll need to cover with your savings. If you’re interested in early retirement, know it’s possible with $3 million – but also know you should prepare appropriately for how it might look. 

• Can I ensure a suitable ongoing income by managing my finances effectively? $3 million should be more than enough to provide a continual income, especially if you organize your savings wisely and invest, for instance, in an annuity with a lifetime income rider. 

Calculate how far $3 million could take you in retirement

Reaching $3 million in retirement savings is a significant milestone, but how you invest, withdraw, and plan will determine how long it lasts.

Use the calculator below to model your retirement and see how long your savings could support your lifestyle based on your age, retirement age, contributions, and investment strategy.

How long will $3 million last in retirement? 

How long $3 million will last in retirement will also depend on the following factors:

Factors that extend how long $3 million lasts include:

• A solid wealth retention and investment strategy that will allow your $3 million to hold value over time

• Remaining resident in/relocating to a tax-friendly, ​retiree-friendly state

• Effective retirement planning, inclusive of a budget for healthcare and similar expenses

Factors that shorten how long $3 million lasts include:

• An expensive, luxurious retirement lifestyle outside the norm, complete with high monthly expenses

• The potential impact of inflation/taxation/ world events on the cost of living at the time when you reach retirement age

• Large, unaccounted-for medical expenses applicable to short or long-term care

How much income tax will I pay on $3 million?

Regardless of your retirement savings amount and how it’s distributed to you, you will likely be paying some tax as a retiree.  

Traditional Individual Retirement Accounts (IRAs) and employer-backed 401(k)s are taxed at the federal level as ordinary income, as are short-term investment gains and pension and annuity distributions.

Federal taxation is graduated across seven brackets, with higher rates attached to higher earnings. You’ll usually be taxed again on this income at the state level. This state rate might be graduated or flat. 

Conversely, Roth IRAs and 401(k)s are taxed when you deposit money, and withdrawals once you retire are tax-free. If you’re investing in and holding onto certain assets for the long term, you can swap regular taxation for often less steep long-term capital gains tax rates. 

Can I retire at 60 with $3 million?

Yes, you can retire at 60 with $3 million, but how long your savings will last depends on your return rate.

• 3% return rate: Using a conservative estimate and accounting for taxes, the portfolio grows at 3% annually while withdrawing $93,600 per year. At this rate, the portfolio would last approximately 30 years, meaning it would sustain retirement until around age 90.

• 5% return rate: With a 5% return, the portfolio grows faster than the withdrawals deplete it.

Can I retire at 50 with $3 million?

Yes, you can retire at 50 with $3 million, but how long your savings will last depends on your return rate.

• 3% return rate: With a 3% return rate, following the 4% rule and accounting for an estimated 22% tax rate, your savings would last until age 87.

• 5% return rate: However, if you achieve a 5% return rate, your $3 million would more than cover your retirement needs, lasting well beyond that.

If early retirement is your goal, working with a financial advisor is essential. They can help you assess your specific financial situation, tax implications, and lifestyle needs to determine if retiring at 50 is sustainable and how to maximize your wealth for the long term.

Can I retire at 40 with $3 million?

$3 million in retirement savings is a sizeable sum. With this amount of money in your pocket, you could afford to retire even earlier than planned.

$3 million could also be enough for you to retire even earlier, at 40 or even 30, depending on the kind of retirement lifestyle you’re after and the sorts of expenses you’ll face month to month.

Let’s look at some calculations. Say you want your $3 million to last until you reach the age of 80.  If you choose to retire at 40, your annual income – not factoring in income from other sources or taxes – would be $75,000. Alternatively, if you decide to say goodbye to the working world at age 30, you will receive $60,000 annually.

Whether or not this will be enough money for you depends on your chosen lifestyle, but with the median American household yearly income standing at $74,000 in 2022, you have a very good starting point.

How many people retire with $3 million?

When saving for retirement and considering the amount you plan to put toward your golden years, it’s common to wonder how much is enough to retire in the United States, what the average retirement savings amount is, and how you compare. 

The Federal Reserve’s 2019 Survey of ​​Consumer Finances is a helpful point of reference, letting us know that the average American household has retirement savings totaling $65,000.

These savings encompass working adults of all generations, so figures get higher and higher when you look at the data by age group. That said, $3 million exceeds the mean or median amount.  

You're in an undeniably strong financial position if you have $3 million earmarked for retirement. 

The chart below shows that having $3 million saved for retirement comfortably puts you in the top 5% of retirees in America.

How do I increase my retirement savings?

With proper planning and management, $3 million is ideal for a relaxing, financially stable retirement. That said, if, for any reason, you do want to increase your retirement savings, here are some options you can consider: 

• Considering higher-risk investments, which also come with potentially higher returns 
• Cutting back non-essential expenses in other areas so that money can be redirected 
• Speaking with a financial advisor to identify any areas for improvement 

The bottom line

$3 million in retirement savings should more than adequately fund your existence and expenses as a retiree, allowing you a high degree of financial freedom and comfort in your later life. This large sum of money will insulate you until your passing. Especially if your finances are well organized and your savings can replenish and grow over time.  

Once you have enough fortune to be considered a millionaire, expert financial advice is imperative to protect yourself and your financial future. You’ve worked hard to gather this much money over the years. Continue working hard to retain and protect it. Answer our five-minute survey, and an advisor perfectly suited to meet your needs will be in touch. Get started here