Most Americans believe they need to be millionaires to retire comfortably. As of 2025, the so-called “magic number” for the average U.S. adult was $1.26 million, according to Northwestern Mutual (1).
But what if you’re approaching retirement with less than half of that amount saved? Does a six-figure nest egg doom you to a stressful and anxious retired life? Not necessarily.
In fact, in many cases retirees can actually end up with more wealth later in retirement, even if they start off with a relatively modest balance — depending on investment returns, spending patterns and longevity.
Someone with just $600,000, for instance, could potentially end up with $1.5 million by the end of their retirement, assuming strong market returns and moderate withdrawals.
To understand why, let’s take a closer look at three critical factors that shape your life and personal finances after you leave work.
It’s easy to imagine retired life as a period of reckless spending and expensive hobbies. But in reality, most retirees tend to reduce their spending over time.
Research published in 2025 by David Blanchett and Michael Finke in Financial Planning Review revealed that 65-year-old couples holding retirement assets of $100,000 or more draw down only 2.1% annually (2). For unmarried retirees in the same category, the withdrawal rate is even lower at approximately 1.9%.
That’s significantly lower than the so-called “4% rule” that most financial planners use as a starting point for retirement withdrawal strategies (3).
And it’s easy to see why spending may decline in retirement. After all, you no longer need to cover commuting costs, work attire or daily office meals. You may qualify for senior discounts on some products and services and, once you turn 65, Medicare helps cover many — though not all — healthcare expenses.
However, the key reason why many retirees withdraw less from their nest egg is because they have a steady source of income from Social Security benefits.
Read More: The average net worth of Americans is a surprising $620,654. But it almost means nothing. Here’s the number that counts (and how to make it skyrocket)
Social Security is a nearly universal and relatively generous program. About 94% of workers are covered under Social Security and, as of January 2026, the average monthly benefit check is $2,071 (4, 5).
So a retired couple with $600,000 in combined savings would receive roughly $38,500 per year from Social Security — based on the projected average benefit for an older couple in January 2026 — and would need to withdraw from their savings to cover any remaining expenses.
If their annual expenses are $60,000, for example, Social Security would cover about $38,500, which leaves a gap of roughly $21,500 per year to withdraw from their portfolio. That amounts to a withdrawal rate of about 3.6% on $600,000 in savings.
Even if they withdrew closer to 4% annually, there is still a good possibility that their portfolio could maintain stability or grow over time, depending on investment returns and market conditions.
Although the 4% rule is still the gold standard in the financial planning industry, it was developed in the 1990s and was based on historical market data from prior decades (6). In other words, it may not perfectly reflect today’s market environment.
In fact, even its creator, William Bengen, has recently suggested a higher sustainable withdrawal rate of about 4.7% under certain conditions.
Simply put, the traditional 4% rule may be too conservative. That’s reflected in the recent capital market performance.
As of February 2, 2026, the 20-year U.S. Treasury bond yield is approximately 4.8% (7). Meanwhile, Vanguard’s S&P 500 ETF has delivered a whopping 15.55% annualized yield over the past 10 years (8).
In other words, stocks and bonds have both outperformed the 4% withdrawal benchmark over recent periods. Even if you assume more moderate future returns, portfolios can still experience asset appreciation over the long term.
Let’s take an example. A retired couple has $600,000 in net personal assets, 60% in stocks and 40% in bonds. They assume a 10% annualized return on stocks and a 4% annualized yield on bonds.
The expected annual return of this 60/40 portfolio is 7.6%. This is calculated using a weighted average:
If the couple withdraws 4% annually, the portfolio’s net growth rate would be approximately 3.6% per year. At that rate — assuming consistent returns and withdrawals — their $600,000 portfolio could potentially grow to roughly $1.45 million over 25 years, based on compound growth at 3.6%.
In other words, they could potentially end retirement with more wealth than they started with — and above the “magic number” many Americans associate with financial security.
That said, this projection assumes steady returns and does not account for market volatility, inflation changes, sequence-of-returns risk or varying withdrawal needs. Real-world outcomes would likely impact these simplified estimates.
Join 250,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Northwestern Mutual (1); Wiley Online Library (2); Northwestern Mutual (3); Congress.gov (4); Social Security Association (SSA) (5); U.S. News (6); U.S. Department of the Treasury (7); Vanguard (8)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
