Can You Retire On $1,000,000 In 2025?

For many attorneys, the question isn’t simply can you retire — but rather, will you retire? Your professional identity is deeply connected to your practice. The familiar rhythms of case preparation, client meetings, and courtroom appearances structure your days and define your purpose.

Yet underneath these considerations lies a practical concern: Do you have enough saved to maintain your lifestyle without a regular paycheck?

Let’s address the million-dollar question directly: Is $1,000,000 enough to retire on in 2025? The answer requires more than a simple yes or no. It demands a process — one that’s straightforward but reveals the unique contours of your financial situation. By the way, the portfolio size is irrelevant — this process can be used from any starting point.

Step 1: Identify Your True Retirement Expenses

Many financial advisors start by suggesting you’ll need to replace your current income after you stop working. This approach often misses the mark. To cover the same expenses, the amount you’ll need from retirement income sources will likely be much less than your working salary for several key reasons:

Tax differences

You’ll more than likely find that your taxes in retirement will be different from your working years.

For example, you’ll no longer pay FICA taxes, which include Social Security & Medicare for a combined 7.65% of gross income — double this for practice owners. Additionally, Social Security benefits are taxed differently from earned income — from 0% to 85% depending on your other income.

Many states also offer tax breaks on retirement income. State taxation differs, so you’ll want to be sure you understand how your state taxes retirement income (more on this in my example calculation below).

Eliminated expenses

Perhaps your mortgage will be paid off, or you’ll downsize your home. Professional expenses like malpractice insurance, bar dues, and continuing education will disappear if you’ve completely severed.

Of course, some will choose to continue working in a reduced fashion and therefore may maintain some of these expenses. The idea here is to consider which expenses may change after your transition.

No more saving for retirement

If you’ve been maximizing contributions to retirement accounts, which can be a significant amount of cashflow in later working years — this substantial portion of your income was never available for spending anyway.

Consider this example: An attorney earning $250,000 annually might actually only need $100,000 in after-tax income to maintain their lifestyle after accounting for these factors. Now, don’t misunderstand me to say that everyone spends less in retirement. As a matter of fact, many will spend more due to increased activity in the hobbies they now have more time for. But when comparing apples to apples, it generally costs less to maintain the same lifestyle as a result of the factors mentioned above.

When you’re ready to quantify these expenses in retirement, there are two methods to calculate:

1. Top-down approach: My personal favorite as I hate budgeting. Start with your gross income, subtract taxes and savings. This method is simpler as it can be done in a matter of minutes but typically overestimates expenses — which builds in a safety margin.
2. Bottom-up approach: Itemize every expense category. While more accurate in theory, this method often underestimates spending because smaller expenses get overlooked. Most attorneys can recall their mortgage payment by memory, but may forget about that annual cost to maintain the furnace and HVAC system.

Step 2: Identify Stable Income Sources

List all dependable income streams you’ll have in retirement:

• Social Security benefits
• Pension income
• Practice sale installment payments
• Rental property income

These sources provide a foundation of reliable cash flow that doesn’t depend on market performance.

Step 3: Calculate Your Income Gap

Subtract your stable income from your projected expenses. This gap represents the amount your investment portfolio needs to generate each year to cover the difference.

Step 4: Apply the 4% Rule – Starting Point Only

The 4% rule, developed by William Bengen, suggests that withdrawing 4% of your portfolio in your first year of retirement, then adjusting that amount for inflation in subsequent years, gives you approximately a 90% chance of your money lasting 30 years. This rule assumes a balanced stock and bond portfolio that is properly managed — a large assumption to make, but we’ll accept it since this article is less focused on investment management and more so exploring retirement readiness.

Let’s work through an example:

Portfolio:

• $650,000 in a Traditional 401(k)
• $150,000 in a Roth IRA
• $200,000 in a brokerage account
• Total: $1,000,000

Income Sources:

• $3,000 monthly Social Security benefit
• $1,500 monthly spouse’s Social Security benefit
• Total Annual Stable Income: $54,000

Annual Expenses: $105,000 in total expenses ($100,000 in spending needs + estimated taxes of $5,000)

Note: I use financial planning software for these tax projections but there are other free tools available like this free retirement tax calculator from Smart Asset. For the most accurate projections contact your CPA or tax professional.

Income Gap: $51,000 ($105,000 – $54,000)

Distribution Rate: 5.1% ($51,000 ÷ $1,000,000)

Since 5.1% exceeds the recommended 4% withdrawal rate, this attorney’s plan suggests potential risk of portfolio depletion over a 30-year timeframe.

But should the analysis stop here? I wouldn’t be so quick to dismiss the idea of retirement today in this situation. Let’s keep going.

Step 5: Understanding the Limitations of the 4% Rule

The 4% rule offers a useful starting point, but retirement rarely unfolds in such a linear fashion. Several nuances deserve consideration:

Life stage adjustments: You might temporarily exceed the 4% rule while delaying Social Security until age 70 to maximize benefits. Once those larger benefits begin, your withdrawal rate naturally decreases. Unless there’s a surplus of lifetime income, it wouldn’t make sense to continue drawing blindly at 4% when unnecessary.

Irregular income streams: Practice buyout payments might cover all your expenses for several years, allowing your portfolio to grow untouched before you need to tap it. Or, you may plan to collect rental income for 5 years before selling an asset. These irregularities present challenges when applying a static distribution rate to your portfolio.

Inflation adjustment issues: While Social Security is subject to a Cost of Living Adjustment (COLA), other income sources may not be, such as a pension payout. As inflation erodes the purchasing power of your pension, it would be important to understand the impact this would have on your portfolio over time to maintain the same level of inflation-adjusted income.

Flexibility matters: Research by Guyton and Klinger suggests that retirees willing to make modest adjustments during market downturns can potentially sustain higher initial withdrawal rates — perhaps well beyond 5%.

The research also suggests that a retiree may be able to collect more lifetime income if they’re willing to adjust their withdrawal rate slightly over time — according to their spending behavior and market conditions.

Building Confidence Beyond the 4% Rule

The 4% rule is appealingly simple, but often sacrifices accuracy in assessing true retirement readiness. Let’s take a look at some other tools that can provide a deeper level of confidence:

Monte Carlo Simulation: Unlike the static 4% rule, Monte Carlo analysis runs your financial plan through 1,000 different market scenarios to determine a “Probability of Success.” This cash-flow approach can account for changing expenses throughout retirement — like your mortgage being paid off in year 7, reducing your income needs.

The simulation shows a range of potential outcomes across your lifetime, with the probability representing the percentage of scenarios where you don’t run out of money. This approach provides much more insight than a simple withdrawal rate.

Portfolio Guardrails: Building on Guyton and Klinger’s work, this strategy establishes specific thresholds for your portfolio value. If your investments perform exceptionally well, you can increase spending. Conversely, if they underperform, you make modest spending reductions. For example, reducing spending by just 5-10% during market downturns can dramatically improve your plan’s sustainability.

This approach directly addresses the question, “What if I retire and the market drops?” Even when adjustments are needed, they’re typically smaller than feared, removing a major obstacle to retirement timing decisions. Of course this notion assumes that you were properly invested to begin with.

The Retirement Spending “Smile”: Annual income adjustments for inflation are important for an accurate analysis. Yet research shows that retirement spending may not increase in lockstep with general inflation. In fact, research by Ty Bernicke and David Blanchett shows retirement spending follows a ‘smile’ pattern: higher in early active years, lower in the middle period, then rising again with late-life healthcare costs. To put some real numbers to this, if planning for general inflation to be increasing at a rate of 3%, it may be more accurate to assume retirement expenses are only increasing at a rate of 2% for most of retirement.

Planning around this “spending smile” pattern can allow for higher initial withdrawals since your inflation-adjusted spending naturally declines through most of retirement.

Strategic Account Withdrawals: The example in this article includes three different account types: a tax-deferred 401(k), a tax-free Roth IRA, and a taxable brokerage account. It assumed that the entire distribution of $51,000 was taxable at ordinary income rates because it was withdrawn from the tax-deferred 401(k). However, the order and timing of withdrawals from these accounts can significantly impact your lifetime tax burden. Optimizing this withdrawal sequence for your specific situation can add years to your portfolio’s longevity. In the investment world, “Diversification” generally refers to your mix of assets in your portfolio. But in this sense, diversification of account types — and therefore tax impact to your portfolio — is just as important. Converting tax-deferred assets to Roth assets in lower income years is also worth considering.

The Bottom Line

For many attorneys, $1 million can indeed support retirement — especially when combined with Social Security and other income sources. However, the sustainability of your retirement depends on:

1. Your realistic expense expectations
2. Your stable income sources
3. Your willingness to adjust spending during market downturns
4. Your investment approach

This framework represents just the beginning of retirement planning. In reality, each step contains nuances that can significantly impact your financial security. The most successful retirees treat this calculation as a starting point, not the final verdict.

The example above is also reflective of a hard-stop in regard to practice. Ideally, many attorneys may choose to reduce capacity, not fully stop working when they begin the retirement transition. Not only does this approach allow an attorney to gradually dip their toes into retirement but also alleviates pressure from portfolio withdrawals in early years.

Rather than viewing retirement planning solely as a mathematical exercise, consider what a meaningful life beyond practice might include. Many attorneys discover their analytical skills, problem-solving abilities, and desire to help others transfer beautifully to new pursuits — from nonprofit work to mentoring to entirely new interests.

The question isn’t just whether your money will last, but how it can support a life that continues to engage your considerable talents in ways that bring fulfillment without the pressures of billable hours and court deadlines.

DISCLOSURE: The information in this article is not intended as tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This information should not be relied upon as the sole factor in an investment making decision or your decision to retire. In any examples or case studies used, all client names have been changed.

David Hunter, CFP® is a CERTIFIED FINANCIAL PLANNER™ and owner of First Light Wealth, LLC, a financial planning & wealth management firm with a unique focus on serving attorneys nationwide. David has over a decade of experience helping clients build financial plans and has been featured in publications such as Attorney at Work, ThinkAdvisor, MarketWatch, Financial Planning, and InvestmentNews. David also writes weekly to attorneys in his popular Money Meets Law newsletter. For more about David, visit firstlightwealth.com/lawyers or connect with him on LinkedIn.

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