California is one of the most expensive states in the United States, and it can be difficult to make your savings last in retirement. But how long will $1 million last in California? The answer depends on a number of factors, including your age, your expenses, and your investment returns. But according to a recent study by Fidelity Investments, $1 million will last about 15 years in California.
The study assumed a retirement age of 65, an annual withdrawal rate of 4%, and an average annual investment return of 7%. Under these assumptions, $1 million would be depleted by the time the retiree reaches the age of 80.
Pros and Cons About Retirement Living in California
Of course, these are just averages. Your actual retirement savings will depend on your individual circumstances. If you have lower expenses or higher investment returns, your money could last longer. And if you have higher expenses or lower investment returns, your money could run out sooner.
To extend the longevity of your $1 million in retirement, consider implementing the following strategies. Firstly, postponing your retirement allows your money more time to accumulate and grow. Secondly, explore opportunities to minimize expenses, whether it’s through cost-effective housing, budget-friendly food choices, economical transportation options, or other prudent financial decisions. Lastly, opt for a diversified investment portfolio to mitigate risks and optimize returns, ensuring a more sustainable financial future during your retirement years.
If you’re concerned about whether your $1 million will last in retirement, it’s a good idea to speak with a financial advisor. An advisor can help you create a retirement plan that meets your individual needs and goals.
Retirement in California: Good Quality of Life With Costs to Consider
Certain states, such as Mississippi and Oklahoma, would see a $1 million retirement fund lasting approximately 22 years. In contrast, states with already elevated living costs like New York and Hawaii would experience a shorter duration, with the same $1 million retirement fund lasting less than 15 years.
Retirees residing in California face an annual cost of living totaling $72,319.57, resulting in a $1 million retirement fund lasting approximately 14 years. It’s worth noting that retirement periods frequently extend beyond 25 years, as indicated by Fidelity.
Here are some additional factors that can affect how long $1 million lasts in retirement in California:
- Healthcare costs: Healthcare costs are rising rapidly, and they can be a major expense in retirement. If you have a chronic condition, you may need to factor in additional costs for medical care.
- Inflation: Inflation can erode the purchasing power of your savings over time. It’s important to invest your money in assets that will keep up with inflation.
- Taxes: Taxes can take a big bite out of your retirement savings. You may want to consider strategies to reduce your tax liability in retirement.