One million dollars is a common benchmark when it comes to retirement goals, and many resources will recommend this number as how much you should save before you retire. However, while one million dollars may sound like a great goal to strive for, the truth is that one million probably isn’t going to be enough for you to live a comfortable and enjoyable retirement. To better understand how long one million dollars will actually last in retirement, we’ll take a look at some of the factors affecting how much retirement costs.

Location, Location, Location

The first problem with setting one million dollars as the standard across the board for how much people should save for retirement is the fact that the cost of living varies dramatically depending on where you are located. A person living in a small town in Mississippi will be able to make one million dollars last a lot longer than a person living in New York City or Honolulu. In determining whether one million dollars will be enough to retire on, it’s crucially important to take into account the cost of living for where you are located.

Lifestyle Choices

Some people are able to get by perfectly fine on less than $20,000 a year and are quite happy doing it. Others have become accustomed to lifestyles that cost six figures to maintain. While it’s one thing to calculate how much you need to save just to survive post-retirement, it’s another thing entirely to calculate how much you need to save to pay for the lifestyle you have become accustomed to and actually enjoy your retirement. Since this figure is going to be different for every person, setting a single benchmark of one million dollars that applies to everyone is largely ineffective.

The Effect of Inflation

Inflation is an ever-present force, slowly eroding the value of the money we set aside. The good news is that investing your money in companies rather than keeping it in cash allows you to bypass inflation. However, this does not change the fact that inflation skews the true value of benchmarks such as one million dollars. The truth is that the buying power of one million dollars today is not going to be the same as the buying power of one million dollars twenty years from now. For this reason, it’s a good idea to factor in the average inflation rate when setting your retirement goals.

Is One Million Dollars Enough?