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# What Will \$1 Million Get You in Retirement?

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## A retirement expert breaks down the assumptions.

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MINYANVILLE ORIGINAL I spend a lot of time helping people understand how much money they will need to meet their retirement goals. Today I want to look at this another way: What will \$1 million actually get you in retirement? This is an interesting question because a) many people believe that \$1 million is a comfortable amount to meet their retirement goals and b) we can look at the different ways in which a couple can use this \$1 million without running out of money.

Like any retirement calculation, this one involves many assumptions. But as long as our assumptions are reasonable, say 6% for equity returns rather than the 10% figure that many people used to use, we can come up with a very reasonable estimate for how much money one needs to retire comfortably.

Let’s start with the assumptions I used for the couple we will look at:

Before generating a retirement plan for this couple, the first thing we need to clear up is: What constitutes success? We live in a dynamic world, especially when it comes to investing. So I like to look at the probability of never running out of money in retirement using Monte Carlo analysis, where thousands of scenarios are run, with shocking investment returns in every scenario in every year. In this example, I will define success as having a probability of at least 80% that funds never run out in retirement.

Using Monte Carlo analysis in our retirement planner I calculated that the probability they never run out of money is 95%. This easily meets our definition of success. In fact, this couple can spend more than \$50,000 and still succeed, given that our definition of success is that the probability that funds are never depleted is 80% or more.

So how much can this couple spend and still have an 80% chance of achieving all of their retirement goals? I ran some scenarios and found the answer to be \$55,000. This is the amount they can spend each year and still have an 80% chance of never running out of money.
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