Why You're Safe To Ignore the 'You Need $1 Million for Retirement' Crowd
You might be better poised for retirement than you think.
Enjoying your golden years requires astute, meticulous planning. And above all — capital — lots of it. For many, that magic number is a minimum of $1 million.
Findings from Northwestern Mutual, which polled 4,626 U.S. adults, showed most Americans believe they require $1.26 million to retire. While the cost of living has soared in recent years, not every retiree needs to be a millionaire.
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Most Americans Don't Have $1 Million Saved
According to the Congressional Research Service, 54.3% of households had retirement accounts in 2022. Within that 54.3%, only 4.6% had more than $1 million.
In other words, simply having a retirement account puts you ahead of many.
When looking across all workers, including those without retirement accounts, the numbers are even more sobering. The National Institute on Retirement Security found the median amount saved across American workers was just $955.
You read that correctly: $955.
Why $1 Million Isn't a Universal Rule
Consulting with a financial advisor is always recommended for major financial decisions. That said, scanning the country for more affordable regions can help lower your monthly expenses and the amount you need to retire.
For instance, a retiree in Oklahoma (ranked the cheapest state to live in by Forbes) may not require as much as retiree living in California or Hawaii.
Furthermore, someone carrying a mortgage will have less money available, whereas as a homeowner whose mortgage is paid off will have more to save or spend.
Finally, lifestyle plays a pivotal role. Some retirees choose to spend their later years staying indoors, cooking for themselves and living modestly, while other retirees opt to travel and explore the world. Neither choice is really right or wrong — but the latter will cost more.
How Social Security and Pensions Change Your Retirement
The Senior Citizens League reports that 67% of seniors depend on Social Security for more than half of their income. The program serves as a lifeline for millions of older Americans and has lifted millions out of poverty since its inception. More importantly, Social Security is not tied to the stock market, which is important for seniors living on fixed incomes.
Additionally, many retirees receive eligible pensions from a wide array of sources, including employer-based plans, public-sector jobs and U.S. military retirement benefits.
The Real Number Is Personal
To conclude, $1 million is an arbitrary figure.
This is not to undermine the necessity of careful planning. On the contrary, retirement planning is arguably one of the most consequential financial decisions you will ever make, and major decisions related to retirement require professional counselling. But ultimately, the amount you need depends on where you live, your housing situation, lifestyle and income sources.
As a general rule of thumb, Fidelity advises having one year of income set aside by age 30, three times by 40, six times by 50 and 10 times your salary by age 67. This varies from individual to individual, but it should set you up for success as a safe benchmark.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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