Why $2 Million Is the New $1 Million for Retirees in These 10 Cities

DenisTangneyJr / Getty Images/iStockphoto

Commitment to Our Readers

GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.

20 Years
Helping You Live Richer

Reviewed
by Experts

Trusted by
Millions of Readers

For decades, hitting the $1 million milestone meant that retirees were set. Sadly, numbers may no longer be the case, especially in high-cost cities.

The reason? The math for expenses like housing prices and healthcare costs combined with longer lifespans and inflation just aren’t adding up anymore. In some areas, $2 million is more what it may take to retire comfortably without constant financial stress.

Here’s why $2 million is the new $1 million in certain areas in the U.S. and the cities where the shift is most obvious.

Withdrawal Amounts Aren’t as Powerful Anymore

For many retirees, they’ll lean on the 4% rule as their baseline, which suggests that retirees can withdraw 4% of their savings annually in the first year, then adjust each year afterwards for inflation.

If you have $1 million, that amounts to about $40,000 per year. 

The problem is that average retiree spending already exceeds what $40,000 can safely support. According to the Federal Reserve Bank of St Louis, those who are 65 years and older spend about $61,432 per year nationally. The amount may be higher for high cost of living areas.

In this case, $2 million, or the ability to spend about $80,000 in the first year of retirement, with amounts being adjusted for inflation afterwards makes more sense. 

Healthcare Costs Are Bigger Than Many Retirees Expect

You probably already know that healthcare is one of the most expensive retirement expenses. A healthy 65-year-old retiring in 2025 was projected to spend roughly $183,388 to $380,000 on healthcare over retirement under traditional Medicare coverage, according to data firm Milliman. 

Long-term care can dramatically raise your costs. Genworth’s Cost of Care survey found that the median annual cost of assisted living is now over $70,000 nationwide, while private nursing home rooms can cost more than $100,000 per year.

Don’t Forget Inflation

Since 2000, U.S. inflation has gone up around 90% overall, which has eroded purchasing power across essentials like housing, healthcare and insurance, according to research from Visual Capitalist. 

That means retirees today need significantly more savings just to maintain a middle-class lifestyle. Case in point: the increased average expenditures mentioned above data gathered. 

Housing Costs in High-Cost Cities

Housing is often another major expense. In high cost areas, even downsizing doesn’t guarantee that you’ll better afford those expenses. Higher home prices also come with other higher expenses like property taxes, homeowners insurance premiums, utilities and homeowners’ association (HOA) fees. 

Cities Where $2 Million Is Becoming the New Baseline

These cities in the U.S. are known as a high cost of living area, and where $2 million is probably what you’ll need to retire comfortably. 

• San Francisco
• San Jose, California
• Los Angeles
• San Diego
• Seattle
• Boston
• New York
• Washington, D.C.
• Miami
• Honolulu

The common feature of all these cities are high housing prices and healthcare costs. Although cities like Miami don’t have state income taxes, the other expenses still make it not as affordable for many. 

Share This Article: