Retiring on Less than One Million Dollars

Retiring on less than one million dollars in retirement savings is a risky proposition.  But … many people do it.  Sometimes people are forced to leave work before they hit that $1,000,000 threshold.  They could be laid off, have a medical emergency, or family issue, etc.   Or, they may voluntarily leave full-time work for other reasons.   Count me in the latter category.

My Voluntary Resignation

gif of suicidal businessmanWhen I was with the federal government, I fell into a suicidal depression every Sunday night, dreading what fresh hell awaited me on Monday.   It wasn’t the work per se, but the bureaucratic nightmare that, unfortunately, is part and parcel of working for a government agency.  You want to do good but are stymied every step of the way by middle management, politics and just pure inertia.

Please note, I did not leave my federal job on a whim.   However, as more and more of my colleagues told me they were taking antidepressants just to get through the day, I asked myself – Is this is the type of life I wanted?  Sure, the money was good, but my biggest fear was to die at my desk, hating my life, chasing the dollar.  (And, this was not some crazy fear – I  knew of several coworkers who dropped dead at work!).   Furthermore,  longevity is not in my genes.   So, even before I reached the age of 50, the idea of retiring early took root.

Planning Stages

I began to do some research.  Financial planners say that you need to have 75-80 % of your pre-retirement income in savings.  Thus, if you need  $40,000 a year to live on, you had to retire with around one million dollars in savings.

My pre-retirement income was around $120,000, so, 75% of that would be $90,000/year.  But, I questioned if I really needed amount.  What if,  at the time I retired, I had no debt  (particularly, no expensive mortgage)?  What of the fact that I had always lived on a lot less than my pre-retirement salary?  Further, I knew that my expenses would decrease once my son graduated from college.   I also knew that my future pension and Social Security payments would be about $50,000/year.  Did I really need another $40,000 (or $1 million in retirement savings)  before I could retire?

I had to figure this out.

1. Budgeting, bills, and moving

Beginning about 8 years before I retired early,  I:

  • Created a budget to find out how much I actually needed for the necessities of life.  By “necessities of life,” I mean housing, clothing, food, transportation, and other non-negotiables.  I also determined what expenses would drop off in retirement.
    • By keeping a detailed budget, I learned that a lot of my spending was impulsive.  It got so bad that I would buy things online and forget what I ordered!   People call it “retail therapy,” but buying things I did not need was my way of filling an emotional void.
    • In any case, by the end of 8 years, I had worked through a lot of my impulse spending issues and had a good idea of what I needed to live.
  • Explored lower cost of living areas and watched the housing market in those locales.  I also spoke to realtors in different cities and traveled to several different cities.
  • Paid off any non-mortgage debt.  Thankfully, it was not much.
  • Created an emergency fund that I could use for unexpected expenses.

I should mention, before I retired, 25% of my pay was earmarked for the government 401 k (Thrift Savings Plan).  So,  I was actually living on 75% of my income.  Of that 75%, about 1/3 of my pay went towards the mortgage on my expensive (and underwater) California home.  I was also paying around $650/month in premiums for my employer’s health insurance plan to cover me and my son.  Finally, at that time, I was supporting my son, an undergrad.  Although I had a 529 account, there were always uncovered expenses.

After years of keeping a budget, I discovered that, once my son graduated, if I sold the expensive house, moved to a less expensive state and paid cash for a place, my expenses would drop substantially.  Further,  I discovered that, because I’m a disabled veteran, my healthcare was free. (Yes, I realize that free medical care isn’t an option for most people. That is one reason I am also going to explore medical care outside the U.S. in future posts.)


Without a hefty mortgage, health care premiums, or a dependent to support, my actual expenses would drop far below 75% of my former income – i.e., to about $60,000/year.     I then ran numerous calculators to see if I could retire early, including my future pension, Social Security benefits, and the $600,000  I had retirement and savings accounts.   All the calculators indicated that I had enough to retire.   (Some free online retirement calculators are Fidelity’s retirement calculator for non-clients, Bankrate, and on the  AARP website.)

BOTTOM LINE;  I did not need $1 million in my retirement savings accounts to retire.   In arriving at this conclusion, I recognized that nothing in life is guaranteed and that a pension and/or Social Security could disappear, or the money in my IRAs and 401 ks could take a hit if there is another recession.

a) First Retirement Attempt

In 2014, when I was 52, the California housing market began to recover (I was no longer underwater!!).  My son also received a full ride to graduate school.  It was then I positioned myself to leave a job that made me miserable.  After selling the expensive house, I took a deferred (early) retirement.   With no housing payment, no expensive health care costs, and no dependents to support, my income needs dropped dramatically.   I  rented an apartment in Nevada (lower cost of living) and figured that I could live on savings until I could draw my pension in 3.5 years.  If I needed to, I could always get a part-time job.

b) Second retirement attempt

Bea Arthur quote about being one chromosone from becoming a potatoesHowever, within two months of retirement, I was bored to tears.  The truth is,  I had not really planned out my retirement.  I spent my days taking online classes,  watching way too much t.v., eating junk food, and reading.  I was becoming a couch potato and I was fat and miserable!

When a friend told me about a state government job opening in Washington, I applied.  In retrospect, I should have carefully thought things through.  However, when you are going stir crazy with boredom, you are not in the best mindset.   So, when the government offered me a job in Seattle, I  impulsively accepted.

Of course, it was a mistake.  After working for 10 months in the Emerald City, I realized I did not like Seattle.  I hated the depressing rainy weather, the horrible traffic, the cost of living, and working 10+ hours a day.  On the plus side,  I really liked my co-workers.  So,  I switched to part-time work and did that for a little over two years.  During my off time, I checked out the housing options in the lower cost of living areas I had previously researched.

In 2016, I found a  small condo to buy in Las Vegas.  Why Las Vegas?  First, I could pay cash for a  fixer-upper condo (less than $100K!!).  The Vegas housing market had still not recovered from the recession.  Second, I would still be close to my son (an hour flight, or an eight-hour drive).  Third, I could fly in and out of Las Vegas with ease from McCarran International Airport.  And, fourth, there is no state income tax in Nevada.  That meant, my future pension, Social Security payments, and retirement account withdrawals would not be subject to state income tax.

After leaving Seattle and after finishing a contract job in Sacramento, I officially retired from full-time work in March 2018.

2. Cost of Living

As I previously mentioned, before my second retirement at 56, I had paid cash for a fixer-upper condo in less expensive Las Vegas.  In April 2018, I also traded in my paid-for but fuel inefficient Pathfinder for a smaller fuel-efficient vehicle.  Full Disclosure: I got a used 2013 Mini Cooper S Paceman.  It is the one toy I have since I gave up my nice home!

red mini cooper

Looking at my current budget, I am actually living on $30,000 a year.  This amount covers all my basic necessities of life as well as many perks.  I still have high-speed internet, basic cable TV, unlimited cell phone plan, Amazon Prime, weekly entertainment expenditures, and, most importantly, enough left over to travel.  (See my 2018 budget.)  This is quite a bit less than the $60,000/year that I thought I needed.

There is a caveat, however: the higher the cost of living, the faster the money will go.   For example, if I lived in Hawaii, I could run through all my retirement savings in less time than living in a lower cost of living state.  One’s budget is affected by property prices, property taxes, income taxes, grocery prices, and gas.   I chose to buy an inexpensive condo in a middle-class neighborhood with low HOA fees and property taxes.   This was a lifestyle choice.  However, now the value of my condo has doubled due to the booming Vegas housing market.  More on that later…

I recently read an article called “Thinking about Retirement,” by Lori Thomas. Ms. Thomas notes that where you live can have the biggest impact on one’s retirement finances.  She advises exploring the availability and cost of healthcare services for seniors in any place you are considering retiring.  Costs vary significantly from place to place, so it is worth your while to do some research.  She also advises that retirement planning should include planning for taxes, including income, property and sales tax. When looking for a new home, you should look for a location and a price that will help you stay on budget for your golden years.

Questions to ponder regarding your current home state:

Does your state tax Social Security? Seven states don’t tax it: FL, NV, SD, TN, TX, WA,  and WY.  These states also don’t tax pension incomes or benefits.

Is there a state income tax? Several states (WA, NV, WY, TN, FL, NH, AK and SD) don’t have a state income tax.  However, if you don’t have a high taxable income, it might not make sense to move cross-country just to save a couple hundred per year. You will lose money on airfare if you will be flying back home often to see your family.

Bottom line: Make sure you live somewhere that would allow you to tap into your savings for decades.  See my Cost of Living post for more information.

As for me, within the next year, I plan to relocate to a less expensive area.  As the Las Vegas economy has improved, things are getting expensive.   I’m now looking for a new place, and even exploring the possibility of moving to another country.   While I believe I will go back to working part-time, I want the security of knowing that I do not have to if I don’t want.

Income Needed in Each State

3. Other Payment Sources

Do you receive a pension? Does your pension include a cost of living increase? Do you receive disability pay?  What will you get when it’s time to claim Social Security benefits?

  • If you want an estimate of your Social Security payment, go to mySocialSecurity.  Sign up if you haven’t already. You’ll want to make sure that your earnings record is accurate.
  • Here is an article on how early retirement affects Social Security
More on Social Security

Many of us wonder if Social Security will completely run out of funding before we are eligible.  From what I have read, Social Security faces funding issues within the next 20 years. However, most experts indicate that, even with no changes, Social Security, will still be able to pay 75% of benefits in 2034-2035.  (Without a surplus, the amount the government can pay out in benefits can only match what’s coming in via employment taxes.  Employment taxes are what fund Social Security.)

I believe (hope) that, with enough political pressure, the government will be forced to deal with Social Security’s financing problems before we are facing reduced payments.  However, because we are at the whims of politicians, it can’t hurt to take action NOW in case of the worst case scenario.  Here is a great article from 2016 about how to save Social Security.

4. Side Hustle, Part-time Work

Even now, I occasionally work as a contractor.  I also am exploring gig economy options, such as Airbnb.  See my post regarding part-time jobs to get some work ideas.

hand holding cell with airbnb logo

UPDATE:  Some studies show that spending actually declines in retirement.  Here are some excerpts from  the 11/29/18 New York Times’ article, The Myth of Steady Retirement  Spending, and Why Reality May Cost Less

Financial advisers have a few ways of describing the decline in retirement spending over time. One of the most popular, coined by the certified financial planner Michael K. Stein, is to view retirement as three stages: your Go-Go years, your Slow-Go years and, finally, your No-Go years.

Data from the Bureau of Labor Statistics suggests the decline is true. The mean spending for households headed by 55- to 64-year-olds was $65,000 in 2017, according to its Consumer Expenditure Survey. Spending dropped to $55,000 between ages 65 and 74, and after that it fell to $42,000. Housing costs remained steady and health care expenses increased, but nearly every other category — transportation, entertainment, clothing, food and drink — declined sharply…

J. P. Morgan Asset Management has studied the spending patterns of its customers and witnessed the same trend. Spending drop-offs are even more pronounced among retirees with $1 million to $3 million in assets, said Katherine Roy, the firm’s chief retirement strategist.

It comes down to whether retirees are “homebodies, globe-trotters, health care spenders and foodies.”

It’s worth figuring out which profile matches your spending, said Wade Pfau, a professor at the American College of Financial Services and director of retirement research at McLean Asset Management. If you fall into one of the first three groups, you may be looking at spending increases throughout your retirement. But people in the biggest group — the 39 percent who spend more than others on food and drink — can reasonably expect the “Go-Go, Slow-Go, No-Go” progression.

“This is the group that tends to spend less as they age,” Dr. Pfau said


I am a 50-something retired woman, currently residing in Las Vegas, Nevada. This blog addresses the budgetary challenges and other concerns of "young" retirees. We are an overlooked group: too old to be considered middle-aged and too young to be called senior citizens.

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