Challenging The $1 Million Retirement Myth – One Economist's Alternative

Investment firms and news headlines often suggest you need $1 million in savings to retire comfortably. Still, one prominent economist argues that you can retire for much less, citing the experiences of actual retirees.

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In a Wall Street Journal column titled "You Don't Need to Be a Millionaire to Retire," American Enterprise Institute senior fellow Andrew Biggs noted that most Americans retire with far less than $1 million in savings.

Biggs said the idea that we need so much money stems from opinion polls, personal finance columns, and a few common financial planning rules of thumb.

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Financial advisers often recommend saving 10 times your annual retirement salary, allowing you to live on 4% of your savings each year. A well-known survey found that Americans believe they would need $1.46 million in savings to retire comfortably.

Biggs disagrees that you need $1 million to retire comfortably. He examined data from the federal Survey of Household Economics and Decisionmaking conducted between 2019 and 2022 to support his argument.

The survey asked Americans ages 65 to 74 about their financial well-being in retirement. The majority – about 85% – reported either being comfortable or "doing OK." Only 15% said they were struggling.

Biggs argues that this finding is significant because most retirees have less than $1 million in savings. The typical senior in the survey who reported a satisfactory retirement had $50,000 to $100,000 in savings.

"It's impossible to find any evidence that seniors need even a fraction of $1.46 million in savings to be financially secure," Biggs wrote.

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Biggs said retirees don't need as much savings as financial planners often suggest. He calculates that the average couple who retired in 2022 received nearly $46,000 in annual Social Security benefits, which, although not extravagant, is more than double the elderly poverty threshold.

Biggs believes that retirement planners exaggerate the income retirees need and the expenses they will incur to generate more business.

Reactions to Biggs's column were mixed, ranging from admiration to outrage. Some readers praised the piece on X, while one critic sarcastically commented, "You don't need to be a millionaire to retire and do NOTHING!!!"

Biggs, a well-known conservative economist, is known for his contrarian views. Earlier this year, he and a colleague caused controversy with a paper advocating eliminating the 401(k) plan. His latest claim – that people don't need $1 million to retire comfortably – contradicts the prevailing wisdom in the retirement planning industry.

"What about rising healthcare costs?" said Lili Vasileff, a certified financial planner in Greenwich, Connecticut. "What about more older adult children living for free with older parents? What about divorces in later life that halve all assets on the cusp of retirement?"

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Data from the 2022 Survey of Consumer Finances shows that the typical senior with a retirement account has about $200,000 saved. However, only half of households in the 65-74 age range report having retirement accounts.

Biggs says many seniors have other forms of savings, such as pensions. But Alicia Munnell, director of the Center for Retirement Research at Boston College, said Biggs is overly optimistic about the financial security of American retirees.

"I don't know people, really, who have retirement savings who don't have a retirement account," she said.

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