The Million-Dollar Question: How Much Is Enough to Retire?

The Million-Dollar Question: How Much Is Enough to Retire?
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Determining how much you need to retire has long been a popular topic in financial advice. The answer depends on a variety of factors and circumstances, and there’s far from a consensus about any “magic number” for a worry-free retirement.

That said, there is a belief that the $1 million mark in retirement savings represents the pinnacle of success. But given today’s cost of living, is that popular benchmark all it’s cracked up to be?

We thought we’d let two MOAA staff members debate the issue — they debate everything else, after all, and this discussion should offer valuable insight for those with a military retirement in mind – either around the corner or well into the future. The question: Does a military member need more or less than a million dollars, in addition to their military retirement and eventual social security, for retirement?

Up first: Col. Jim O’Brien, USAF (Ret), MOAA’s Chief Operating Officer. Investment enthusiast. Consumer advocate. Proud Bostonian. His opponent: Lt. Col. Shane Ostrom, USAF (Ret), CFP® and benefits information expert. Prolific advice-giver. Proud Texan.

O’Brien: First, let me say good ol’ Shane is far more formally qualified than me to answer this question, but of course that doesn’t mean I don’t have anything to say. Before he even says a word, I know he’s going to argue that a million dollars, or less, is more than enough for retirement. Along with that advice, he’ll offer some plans for clipping coupons and explain how a pickup truck from 1994 will last another decade “if you treat her right.”

That’s not a bad thing. It’s a very practical approach to planning for retirement. But is it really the right one?

I’d start by answering a question with a question. How much is a million dollars? Well, for practical purposes, based upon the 4% rule (which may be a future topic for debate), a million dollars is the equivalent of $40,000 a year ... before state and federal taxes. That’s a decent amount of money — coupled with military retirement and, eventually, Social Security, you’re not going to be in a soup kitchen unless you’re volunteering.

But do you really think that’s enough to ensure you can enjoy your best life and be prepared for the curveballs life may throw your way?


Ostrom: First off, Jim’s no financial hayseed. He was a finance officer (accountant) in the Air Force, was MOAA’s CFO (accountant), and is intimately involved with MOAA's investment accounts.

Despite all that, he’s still all hat and no cattle.

First, many retired officers are comfortable with their established economic status. We all know at least one retired servicemember with a diet heavy on chips, dip, and Corona who is more than happy living on his retired pay. Using invested assets as a standard, my “worst client” was a Navy captain without a penny of invested assets when he retired from service. But he made it happen. We’re not talking about those guys.

However, considering that the national median retirement savings for people ages 55 to 64 is $107,000 according to the Government Accountability Office, we are a long ways from the magic number favored by evil geniuses everywhere. Yet people are making retirement happen, even though more than 80% of retirees don’t have a pension.

Yes, a million bucks can generate approximately $40,000 a year ($3,330/month) in income. Let me be conservative for a moment and spitball some numbers (Jim warned you I would): With Service retired pay of about $4,250 a month, two monthly Social Security checks ($2,800 for the household “breadwinner” and $1,400 for the spouse), and some supplemental income ($1,500 a month off $450,000 invested), a couple generates $9,950 a month, or just under $120,000 a year.

I believe most couples would be comfortable in most areas of the country on this amount. The median household income in the U.S. is $59,000! That should be enough to have fun and still cover the curveballs that may pop up – at least it should be, if you put on your green eye shade and keep your ledger straight by controlling expenses.

What say you, Jim?


O’Brien: Shane, I’m not going to pull rank on you and I suppose I came at you a little hard at the start. It’s pretty easy to make it look like I’m talking about champagne problems when all the statistics you and I can site show Americans are woefully unprepared for retirement by comparison.  

We have to make some assumptions to even have this debate because every situation is different. We all have different goals and needs. I’ll use your $120,000 a year and agree you can live a comfortable lifestyle on it, but let’s not make it look like we’d be on “Lifestyles of the Rich and Famous.”

If you plan to work up to when you can get full Social Security, that certainly makes the numbers look much better. But what if you plan to retire at 60 or 62? How are you going to bridge that gap? You could start taking Social Security early, but that comes at a reduced benefit and you’d probably have to start drawing down on your retirement savings. Point is, you might need more money than you think.  

A big part of the personal calculation centers on real estate. If you’ve paid off your mortgage and just need to pay property taxes, utilities, and maintenance costs, then your number starts to look good. If you factor in a second property or vacation home, mortgage or not, the calculations shift, big time.

I’ll grant you that this isn’t a science but I’ll also say your $120,000-a-year number is too low for anyone answering yes to seven or more of the following questions in this completely scientific poll that wasn’t just thrown together to bolster my argument:

  • I plan to retire before my full Social Security retirement age.
  • I will have a mortgage on my primary or secondary property, or will pay rent, during some or all of my retirement years.
  • I plan to leave an inheritance for my children or grandchildren.
  • I plan to help with education expenses for my grandchildren.
  • I may have to help aging parents with living or healthcare expenses.
  • I have a significant charitable giving commitment to my church, college, or other cause.
  • I plan to travel frequently with my family.
  • My lifestyle includes dining out frequently with friends and family.
  • I enjoy relatively expensive hobbies such as golfing or boating.
  • I plan to purchase a new vehicle every 4 or 5 years.


Shane, how many boxes did you check?


Ostrom: A checklist? That’s a low blow. Military members cannot resist a checklist. Doesn’t matter how long.

If what you describe is a person’s objective, they better start their financial plan early and follow it diligently. You will probably need over $1 million in invested assets to live comfortably in retirement and have it last a lifetime. It comes down to having this vision early in your life and planning properly. Or, if you have a shorter timeline, ensure you have high income in your remaining working years to compensate for less time.

On the other hand, if your vision of retirement is simpler, $1 million probably isn’t that important. I’m assuming you have a pension and you managed your Social Security for the best payouts. Some people have simpler lives due to smaller families, fewer toys, less desire to travel, the preference for a comfy cottage versus a McMansion, no need for a vacation home, or no desire to live in a high-cost area. If your life is paid for entering retirement, your income requirement is less. That translates into needing less invested assets.

The bottom line: I’ve never had a client complain about having too much money at retirement. I’ve had several complain, even cry, about having too little.