Upgrade: 10 cities where your $1 million nest egg will last longest

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It’s no longer enough to be a millionaire.

Half of Americans think that $1 million is enough to live off of in retirement, and nearly two in 10 aren’t sure, according to a survey of more than 2,000 U.S. adults released by NerdWallet. That leaves just 31% who say $1 million is not enough.

But it’s that small group who’s probably right, experts say. “For many people, $1 million isn’t enough to live off in retirement,” explains Mitchell C. Hockenbury, a certified financial planner at 1440 Financial Partners. “With people living longer with the advances of medical care and the higher costs of living, a million dollars just doesn’t go as far as it used to.”

Aiming for just $1 million by age 65 may be especially problematic for people in their 20s and 30s, says Mary Ellen Hancock, a senior wealth strategist at PNC Wealth Management — as inflation will lead to most things costing far more than they do now. And it may be hard for the majority of Americans who say they want to travel the world in retirement.

How can $1 million be too little? Let’s say you subscribe to the commonly used 4% withdrawal rule, which means that you take 4% from your nest egg each year to pay your expenses, everything from food to insurance premiums to vacation costs. “At that rate, one would take $40,000 for the year. But, if this is inside of a 401(k) or traditional IRA, it hasn’t been taxed. Once you pay for federal and state taxes (depending on your state) you may be left with $35,000,” explains Hockenbury. “For a married couple with a car loan and the mortgage still not paid off, this can be a tremendous source of stress.”

Now add in a few other factors that can eat into your money. Kimberly Foss, president and founder of Empyrion Wealth Management, points to health care (even when you have Medicare coverage, which may exclude pricey things like some nursing home care). “Having a million dollars in the bank may seem like plenty of cushion, but when treatment for a single catastrophic illness or an extended nursing home stay can absorb funds in chunks of $250,000, that nest egg looks a little less secure,” she says.

Of course, you can likely factor in some Social Security income into what you can spend each month, and if you live in an inexpensive city and have low expenses you may be fine with just $1 million. Indeed, while $1 million might last more than 30 years in certain cities in Texas, in places like New York City, San Francisco and Honolulu, it might last only half that long, or less, according to data released Thursday from personal finance site SmartAsset, which analyzed data on average expenditures for seniors, cost of living and investment returns.

10 cities where a $1 million nest egg lasts longest

Source: SmartAsset

So what is the magic number you need to save for retirement? It depends on the person, says Angela Coleman, a fiduciary investment adviser at Unified Trust — who says you can get a very rough estimate of how much you might need to save using a retirement calculator on a site like Bankrate.com.

Of course, all of this likely sounds overwhelming to those of us who are just starting out. So here are five things you can do right now to start saving and to save more:

• . Start now. As soon as you can, start contributing to a retirement account like your company’s 401(k). The younger you start, the longer your money has to grow.
• . It’s OK to start small, says Coleman. For example, if your employer offers at 401(k), contribute to it, even if it’s just 1% of your salary.
• . Gradually increase your contributions. Hancock says that you should try to up your contributions when you can every six months or so. So if you’re putting in 2% of your salary to your 401(k) now, see how it might feel to put in 3% in six months. This, she says, will give you time to test the waters.
• . Get the match. If your employer matches the funds in your 401(k), try to put in at least what they match — after all, that’s free money.
• . Aim to save more than 10% of your income, experts say. You don’t have to do this right away, but by slowly upping your contributions, you can get there.

This story has been updated.