Rich Americans Say They Need $4 Million To Retire — Should You Aim For This Too?

Years ago, achieving a net worth of $1 million symbolized a major financial success, often viewed as the ultimate indicator of having "made it." Yet, in today’s evolving economic environment, this figure doesn’t carry as far as it used to. With this change, financial experts are recalibrating their benchmarks for wealth in retirement.

A Northwestern Mutual study highlights the gap in retirement goals: the average American expects to need $1.46 million for a comfortable retirement, whereas those with over $1 million in investable assets aim for $3.93 million. This disparity is often due to high-net-worth individuals desiring to maintain their lifestyle and leave a legacy through substantial inheritances or donations.

Don't Miss:

• Warren Buffett flipped his neighbor's $67,000 life savings into a $50 million fortune — How much is that worth today?
• Are you rich? Here’s what Americans think you need to be considered wealthy.

Possessing $4 million would permit a safer 3% to 4% withdrawal rate, equating to an annual income between $120,000 and $160,000. While this isn’t lavish, it surpasses the U.S. median household income of roughly $75,000.

How attainable is the goal of reaching $4 million? Substantial annual investment is required. Someone starting at age 35 and aiming for a $4 million retirement fund would need to invest approximately $60,206 annually, assuming an average annual return rate of 5% — a conservative estimate given the current investment climate.

If someone begins saving and investing at age 25, aiming for the same $4 million retirement fund with an average annual return of 5%, they would need to invest about $33,113 annually. This highlights the early start advantage, significantly reducing the required yearly savings.

Trending: Warren Buffett once said, "If you don't find a way to make money while you sleep, you will work until you die." These high-yield real estate notes that pay 7.5% – 9% make earning passive income easier than ever.

For a person who doesn't begin investing until age 40, the required annual investment jumps substantially to approximately $83,810. This underscores the financial impact of delaying investment and the importance of starting retirement savings as early as possible to make the goal more attainable.

Should You Aim for $4 Million Too?

While $4 million might be the new benchmark for the wealthy, the right retirement target depends on your financial goals, current savings rate, and lifestyle expectations. 

If you lead a more modest lifestyle, aiming for a lower figure, closer to the average retirement goal of $1.46 million, you might be more practical and still afford a comfortable retirement.

If you aspire to maintain a high standard of living or leave a legacy, striving toward or exceeding the $4 million mark could be appropriate.

Your retirement planning should be tailored to your circumstances and financial goals. Consulting with a financial advisor can help determine a realistic target for your retirement savings and develop a strategy to achieve it, ensuring that you have a clear path toward financial security in your later years.

Keep Reading:

• The average American couple has saved this much money for retirement — How do you compare?
• Elon Musk and Jeff Bezos are bullish on one city that could dethrone New York and become the new financial capital of the US. Investing in its booming real estate market has never been more accessible.

*This information is not financial advice, and personalized guidance from a financial adviser is recommended for making well-informed decisions.

Jeannine Mancini has written about personal finance and investment for the past 13 years in a variety of publications including Zacks, The Nest, and eHow. She is not a licensed financial adviser, and the content herein is for information purposes only and is not, and does not constitute or intend to constitute, investment advice or any investment service. While Mancini believes the information contained herein is reliable and derived from reliable sources, there is no representation, warranty, or undertaking, stated or implied, as to the accuracy or completeness of the information