Is $1 million enough to retire? Experts say it’s not

There are few guarantees in retirement. But it’s likely you’ll need more money than you’re saving at the moment, financial advisers say.

Of course, how much you actually need depends on countless factors: where you live, your fixed expenses, the type of lifestyle you hope to lead, your age, medical costs, whether you support anyone else, how much your spouse has saved, your Social Security payments, and on and on. Then there’s inflation, investment returns, and other unknowables to consider. There’s no one-size-fits-all savings figure to aim for.

That said, $1 million used to be the go-to retirement benchmark for financial security, says Michele Lee Fine, founder and CEO of Cornerstone Wealth Advisory. But the rising cost of living means it might no longer be enough, especially in expensive cities like New York, where Fine is based.

“While it is still an exceptional level of achievement, it is questionable whether that amount is sustainable as a source of lifetime income, given improved longevity and high inflation,” says Fine.

Alvin Carlos, a certified financial planner (CFP) and managing partner at District Capital Management, recommends retirees aim for closer to $2 million, double the traditional benchmark. A 2021 retirement survey from Schwab showed many people feel the same way, with the average worker saying they need $1.9 million for retirement. And that’s for people near retirement now—the number may grow even higher for young people, who still have decades in the workforce.

“Even if you can live on $3,000 per month to cover living expenses and travel, you still need to spend money on house repairs, property taxes, health care costs, and possibly long-term care costs,” says Carlos.

That’s alarming, given that the median full-time American worker with a 401(k) had $35,354 socked away last year, according to Vanguard (the average, which is skewed by high earners, is a bit better: around $141,542).

The current economy is setting the new norm for retirement: Inflation and a rocky stock market are worsening America’s retirement crisis, as young workers and retirees alike grapple with the higher cost of living, from housing to groceries to medical care. It’s leading to an increasingly negative outlook for many Americans that they can cover their current bills—never mind afford to retire comfortably one day.

Of course, you can save less than $1 million and still retire—that’s the case for many current retirees. But financial experts say workers need to save more than ever to be comfortable and confident in retirement.

“A million dollars isn’t what it used to be, but it can still provide a comfortable retirement if done right,” says Gates Little, president and CEO at the Southern Bank Company. That said, “if you have been earning $100,000 annually for most of your professional life, you’re likely used to a much cushier lifestyle than a $1 million retirement can provide.”

How to prepare for retirement

Generally speaking, advisers suggest aiming to save 10% to 15% of your income for retirement, beginning in your twenties. But there’s huge variance, and many people cannot afford to stash away 10% of their income each month. Many millennials and Gen Zers say they don’t see the point of saving for retirement, given the ever-increasing cost of living and other existential threats.

But saving even a little bit for the future is better than nothing; it’s highly unlikely that there will come a time when the average person wishes they had saved less money. If saving feels difficult, aim for a smaller dollar amount or percentage each month, says Carlos—even $20 or 1% of your income is a solid start. Don’t let the $1 million–plus figure deter you.

“If you’re not contributing to your 401(k), contribute 3% or 5%,” he says. “You can also set your contributions to increase by 1% or 2% each year automatically so you don’t have to worry about it.”

Another rule of thumb, says Benjamin Westerman, a CFP and CPA and executive vice president of wealth management at OneDigital: Aim to save 20 times your annual spending over the course of your career. This might be easier to mentally account for than 10 to 15% of your income each year when you’re struggling to pay bills.

“By achieving this goal, combined with Social Security benefits, you can enjoy the same standard of living in retirement as during your working years,” says Westerman. “If you’re not sure how much you spend annually, don’t worry. You can confidently work backward and utilize a 4% to 5% withdrawal rate on your investments.”

So if you have $1 million saved, you can withdraw $40,000 to $50,000 a year in retirement. That will be more than enough for some people, depending on where they live and what their expenses are.

All of that said, meeting with an adviser and creating an individualized financial plan that incorporates your (or your family’s) specific goals, income, debt, net worth, et cetera, is crucial for anyone who wants to retire well, says Drew Parker, creator of The Complete Retirement Planner.

“Attempting to offer a specific amount for anyone/everyone to save for retirement is setting them up for failure,” says Parker. “When it comes to finances, no one should need to rely on guesses, assumptions, generic benchmarks, or any advice that presents broad generalizations as specific goals.”

And remember, even if you can’t save much now, that won’t always be true.

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