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Retiring On Less Than $1M

Many financial advisors and fellow physicians say that retiring on less then $1m is impossible. In fact, The number I often hear is somewhere in the $3-5m range.

You hear $5,000,000 and you start picking your nose, staring off into space. It’s hard to wrap the mind around that much money. Most of us feel like it would never happen – so, we disconnect from goal.

Instead of focusing on the net worth for retirement, it might be better to look at the income streams. This is a less intimidating way of looking at retirement.

If you find yourself feeling angry when reading this, no sweat, that’s normal. You can be on either side of the fence when it comes to the size of your retirement savings. Do what works best for you.

Income Needs in Retirement

I figure I need to cover the following important spending categories in retirement:

  • housing
  • food
  • health
  • transportation

For most of us this is only the basics. We want some money for other discretionary spending categories, as well:

  • travel
  • dining out
  • gym
  • gifts
  • shopping

When calculating income needs in retirement, I do the math in today’s dollars. If our money is invested then inflation isn’t a factor because most investments keep up and hopefully outpace inflation.

Different Lifestyles

The biggest unknown factor is what kind of lifestyle you will want to live when you decide to no longer work full-time. It’s your lifestyle choice which determines whether you can retire on less than one million dollars or need far in excess of that.

Are you going to be lavish traveler?
Are you going to go live abroad?
Will you want to live in a bustling city or the countryside?

And my taste my change in the future. I imagine myself wanting to live like a hobo in a hut somewhere, devouring books and going for hikes.

But maybe I’ll want to travel and eat fancy meals, buy fancy clothes.

Income Sources in Retirement

I can retire on less than $1m if I have all of my spending covered. Right? If my $1m can generate all of the income I need, why bother with $4-5m?

The income sources could come from various ways of investing that $1m.

#1. Investing

I could invest $200k in a single family residential income property. I could invest another $200k in a CD. And I could invest $400k in a business. And, finally, the other $200k can be invested in stock index funds or a straight stock portfolio.

#2. Working

Plenty of people work well into their 80’s. I’ve worked with many per diem doctors who were still employed, though only 0-20 hours per week.

And it’s not just clinical medicine, there are all sorts of ways of earning income in retirement.

#3. Social Security/Pension

Finally, some of us will have pension income and/or Social Security income.

Currently, the maximum is a touch north of $3,000/month for SS. But pensions can earn some clinicians $10k/month.

Retiring on Less than $1m

Let’s go with the investment examples from above:

  • $200k in real estate
  • $200k in a CD
  • $400k in a business
  • $200k in stocks

Depending on the exact type of investment you have, it’s fair to assume that you could get a return of somewhere around 6% from all of this.

Retiring on less than $1m with a rate of return of 6% would be an income of around $60,000 per year.

2% return = $20,000/year
3% return = $30,000/year
4% return = $40,000/year

Imagine if you don’t have a work commute. You don’t have to pay down any debt. You don’t have to save for retirement. Nothing. You just gotta figure out a way to spend yo’ money.

Finally, don’t forget the actual $1m, you can spend that down as well. Maybe you’ll be spending only the 6% investment return the first 25 years in retirement, after that you can spend the actual $1m as you get closer to the end of your retirement.


Income taxes in the US aren’t linear, they are marginal. Which means that if you earn more money you’ll pay more taxes based on the marginal tax bracket you fall into.

But that’s earned income – which is very different from investment income or income from a business. Both of these are taxed at much more favorable rates.

The theme in US politics and IRS tax structures is that those who earn less, pay less, and those who earn more, pay more, parabolically. Which means that it’s better to retire on less.

Place of Retirement

If I decide to retire in the US, especially in a state with high taxes, my money won’t stretch as far. My cost of living will obviously be higher and I’ll probably need more than $1m to retire.

But I can downsize in retirement. I could retire on less $1m by moving from Los Angeles to Oregon. Or from NY to Fl. From AZ to NV.

Or I choose the expat life and move to Spain, Latin America, Australia, SEA, or wherever else the cost of living is more reasonable.

Investment Style

Some retirees invest more conservatively as they get older. Conservative investing is synonymous with lower investment returns = lower retirement income.

But I don’t have to do that with all of my investments. I can keep my business and real estate investments. I can keep my CD.

The only investment I may choose to switch around is my stock portfolio, for example.

Retiring on less than $1m is doable if you are willing to take on a healthy amount of risk. But that also means that you have to have some wiggle room in your spending.

Spending Style

That bring us to spending styles. You have someone who cannot imagine cutting anything out of their budget. And then you have their polar opposite, someone who can tighten their purse strings by 60%, if needed.

If my investments aren’t doing well, maybe I’m willing to cut my spending for 2-3 years in retirement. I could travel to cheaper places, eat out less, and avoid buying expensive gifts/clothes.

This way, you can retire on less than $1m and have enough to pay for all basic lifestyle expenses. You’ll have a roof over your head, food in the fridge, and a doctor to go to if you get sick.

Retiring in Luxury

Nothing wrong with living large. Nothing wrong with accumulating a $5,000,000 retirement net worth. Even on the low end, that’s a $100,000 a year if income. And probably as much as $250k/year.

The downside to retiring on only $1m is that if you change your mind you can’t go back to retiring in luxury. You’re stuck with however much you have.

But, you can still work in retirement. If your spending is so important to you in retirement you can always get a part-time job in healthcare. Assuming your health allows it.

2 replies on “Retiring On Less Than $1M”

A lot of different concepts are covered here.

When you say you are suggesting investing $400k (of $1M, 40% of your nest egg) in a business, does that mean you are running the business or are you a passive investor. For the former, that means that you are working, in all likelihood, maybe more or maybe less than a physician. For both, you are risking quite a bit the majority of new businesses fail. That seems like not a great early retirement strategy, if you want to stay retired.

I probably didn’t express the idea very well. I wasn’t trying to recommend one investing strategy over another. The best way to succeed with an investment is to believe in it, understand it, and not feel burdened by it. Business makes sense to me and it’s a good way for someone like myself to stay active while profiting from my interests. For example, I like writing and I like teaching, hence this website and podcast, which both have been earning my money as a business.
My best friend’s parents are retired with over 50 fast food restaurants in their portfolio. They have an operations manager who oversees everything. Are they truly retired? Dunno, I suppose each person who is observing their lifestyle will decide for themselves, as will they.

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