Think $1.5 Million Buys You Freedom? Here’s the Truth About Early Retirement

According to Northwestern Mutual, the average American thinks they need to save $1.26 million by age 65 in order to retire comfortably. Last year, that figure was $1.46 million.

In reality, experts say that neither amount will buy someone the freedom they likely envision for their twilight years.

The Shocking Truth About Your “Magic Number”

Once inputs like inflation, healthcare costs, and lifestyle realities are taken into account, the $1.5 million goalpost seems less like a magic number and more like a bare minimum for retirement savings. 

“I talk to a lot of people who think $1.5 million is the finish line. In reality, it’s more like a checkpoint,” says Taylor Kovar, the CEO and founder of 11 Financial. “That $1.5 million can go a long way, but it depends on your lifestyle, your spending, and how long you need it to last.”

Hilary Hendershott, the President and Chief Advisor at Hendershott Wealth Management, agrees that the $1.5 million mark shouldn’t be thought of as the endpoint for retirement planning. In fact, she thinks retirement savings goals should be less of a “magic number” and more of a “moving target.”

“The stock market ebbs and flows, health costs can vary widely, inflation, taxes, and interest rates change dramatically over time. Also, family support needs can come up at any time. All the rigidity in your financial plan will be tested over the years,” she says. “And don’t forget that how long you live is really the biggest variable in your financial plan. Almost anyone can pay for five years of retirement—but 40?”

Why are financial advisors pushing people to save more than $1.5 million? Probably because that amount of money doesn’t stretch as far as it used to. 

“This number simply isn’t reasonable,” says Sybil Slade, the founder and president of IntegriVest Wealth Advisors. “The bigger question may relate more to the need to boost income and wages…This may very well be a public policy issue and not just a consumer behavior issue.”

Indeed, assuming a conservative 3% safe withdrawal rate, a $1.5 million portfolio will likely only generate about $45,000 per year in retirement income. In June, the Social Security Administration reported that its average monthly check was $2,005.05, making the annual income just over $24,000. That leaves most Americans navigating retirement on a $69,000 annual income for 30 to 35 years.

But that’s not enough money to retire comfortably in 22 out of 50 US states. For example, the most expensive state to retire in, Hawaii, requires nearly $130,000 per year in income, meaning retirees should save more than double the $1.5 million “magic figure” in order to live comfortably.

Hidden Costs That Devour Early Retirement Savings

Where do the costs come from? 

“Health insurance is a big one before Medicare kicks in. Travel, home maintenance, and helping your kids or grandkids can drain savings faster than you’d expect. Even good years come with surprises,” explains Kovar.

Hendershott agrees: “Healthcare (including dental) costs for you or loved ones, not having amortized the cost of new vehicles over time into your calculations, or just weird, one-time expenses can derail your retirement math.”

She also notes that she has seen losses incurred from real estate investments. 

“If you own a residential property that you rent out, you may not realize how variable and risky those cash flow expectations are. Any single property can sustain massive natural disaster losses, extended vacancies, and extremely costly litigation (not to mention the very normal but unwanted upkeep costs that inevitably pop up in the first few years of retirement!),” she says. 

However, there is one threat that looms above them all.

“The biggest threat to your early retirement isn’t market crashes—it’s inflation compounding for 40 years,” says Ryan Greiser, a financial advisor and the co-founder of Opulus, a wealth advisory firm. “What costs $2,000 monthly today could easily hit $4,000+ in 20 years. Add in lifestyle inflation, emergency repairs, and family expenses, and your purchasing power gets cut in half before you realize what happened.”

For example, medical inflation has historically been, on average, 1.7 percentage points higher than general inflation.

Right-Sizing Your Early Retirement Expectations

For those looking to retire early, that means there’s a longer runway for these costs to accrue. This dashes most people’s hopes of living a long life without having to work.

“For some people, early retirement looks like slowing down. For others, it’s shifting into work that feels more meaningful. You don’t have to follow someone else’s blueprint. What matters is having a plan that fits your life and gives you freedom, not stress,” explains Kovar. 

Greiser also advocates for early retirees to continue working in some capacity. “Early retirement isn’t about stopping work—it’s about choosing your work. The most successful early retirees I know didn’t just accumulate assets; they built skills and relationships that generate income without traditional employment. They use their nest egg as a safety net while pursuing passion projects, consulting, or businesses that excite them instead of drain them,” he says.

For those with their sights set on a full retirement in their 50s or early 60s, experts stress that it takes discipline. 

“Retiring early is possible, but the details matter,” says Kovar. “Retiring in your 50s means you’re planning for possibly 30 or 40 years without a paycheck. That takes more than just a big number; it takes strategy.”

Greiser, for his part, says this strategy should include aggressive forecasting on how much money you’ll need to save. “Plan for 3%–4% annual expense growth, not 2%. Build in a 25% buffer above your projected annual needs, or risk running out of money in your 70s,” he explains.

“It’s essential to revisit your retirement math regularly, engage a trusted team of advisors, and stay disciplined with your spending. There are countless justifications for saying ‘yes’ to an expense—but only one way to protect your long-term security: the ability to confidently say ‘no’,” Hendershott adds. 

The Bottom Line

Life is expensive, and $1.5 million isn’t what it used to be. While many people think this is the magic number to save for retirement, in reality, it is likely the bare minimum needed to survive relatively comfortably. 

For those looking to retire early, it is likely that they will have to continue working in some capacity. If this is simply out of the question for you, consider being extra vigilant with your saving standards now to build a larger nest egg. Elements like inflation, healthcare, and unforeseen costs will erode it more quickly than you may realize.