Retirement Savings Goal Surges: $1.46 Million Now Seen as "Magic Number"

Everyone with an eye on retirement has the same question: How much money do I need to maintain my standard of living?

First, you need to know that there's no such thing as a "magic number."

Don't Miss:

• The average American couple has saved this much money for retirement — How do you compare?
• Reddit user reveals his retirement account’s “hourly wage” — how much does your money really make per hour?

For many years, people believed that $1 million was the goal. They believed this would be enough to get them through their retirement years without needing to change their lifestyle.

For some, this may still hold. For others, more or less than $1 million may be needed. 

A Study To Help You Set A Goal

According to Northwestern Mutual’s 2023 Planning & Progress Study, Americans believe they will need $1.46 million to retire comfortably.

If that number sounds high, there's bad news: It's an increase of $419,000 (almost half a million!) from a similar study conducted in 2020 and $190,000 from 2023.

“Americans’ magic number for retirement readiness continues to rise,” said Aditi Javeri Gokhale, chief strategy officer, president of retail investments and head of institutional investments at Northwestern Mutual. “The good news is that they are saving and investing more for tomorrow, even in this time of high inflation and market volatility. That is a step in the right direction and a reverse of what we saw last year when the gap widened rather than narrowed. The challenging news is that there continues to be a big disparity between what they think they’ll need to retire and what they’ve saved to date.”

Trending: 82% of Americans aren’t using this government secured 5% passive income stream, are you one of them?

In 2022, American households’ average median retirement savings was $87,000. Of course, that doesn't mean much without context regarding age.

Here's the average median retirement savings by age now:

• Younger than 35: $18,880 
• 35 to 44: $45,000 
• 45 to 54: $115,000 
• 55 to 64: $185,000 
• 65 to 74: $200,000 
• Older than 74: $130,000

What's The Deal With $1 Million As A Magic Number?

One million dollars went further in the past than it does today, but remember this: There was never a time when this was a one-size-fits-all magic number for retirement savings. 

Instead, how much you need to save should be based on:

• Anticipated retirement lifestyle: Consider your daily living expenses, desired travel and hobbies.
• Expected healthcare costs: Factor in routine medical care and potential long-term care needs.
• Retirement age: Determine how it influences the duration your savings need to last.
• Projected inflation rates: Understand their impact on the future value of your savings.
• Additional income sources: Account for Social Security, pensions or part-time work in retirement.

It would be much easier to save for retirement if there was a magic number, but it doesn't exist. The best you can do is look at your situation as a whole — with a focus on your current savings and age — to set a goal. 

Consulting a financial adviser can help you better understand how much money you need to save for retirement. A professional can offer personalized advice to help you make the best possible decisions.

Read Next:

• Boomers and Gen Z agree they need a salary of around $125,000 a year to be happy, but millennials say they need how much?
• Can you guess how many Americans successfully retire with $1,000,000 saved? The percentage may shock you.

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

Chris Bibey has written about personal finance and investment for the past 15 years in a variety of publications and for a variety of financial companies. He 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 Bibey 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.