Americans think they need $1.46 million to retire. What experts say

When it comes to retirement, Americans have a new number in mind — $1.46 million — for the amount they think they need to live comfortably, according to a new study from Northwestern Mutual.

That estimate is up 53% since 2020, when Americans said they would need $951,000 as the cost of living increased in recent years. It’s also up 15% from last year, when respondents said they would need $1.27 million.

For many savers, this goal may seem daunting, especially since U.S. adults currently have an average of $88,400 saved for retirement, according to the study. Similarly, a recent CNBC survey showed that 53% of Americans feel behind on their retirement savings.

However, experts say having a “magic number” in mind shouldn’t be a priority when planning your retirement.

“The number is not the emphasis,” said John Roland, a certified financial planner and private wealth advisor at Northwestern Mutual’s Beyond Financial Advisors.

“This retirement number is really just a starting point for a broader conversation about how to make clear and competent decisions in this phase of your financial life when you distribute money rather than when you accumulate money,” he said.

Fidelity Investments, the nation’s largest provider of 401(k) savings plans, has stopped providing general estimates of what is needed to retire, said Rita Assaf, vice president of retirement products.

“There is no one-size-fits-all solution,” Assaf said.

She said your individual income probably differs from everyone else’s. Other factors, such as how much of your income you hope to replace in retirement, where you plan to live, the lifestyle you plan to have, your health care costs and longevity, will all impact the actual amount you will need.

“It really depends on your personal situation,” Assaf said. “We think having a retirement plan helps with that, but it has to be a personal retirement plan.”

Financial advisors agree that a high savings rate, combined with appropriate asset allocation, is one of the most important elements of building wealth. This is the number to focus on, they say.

Fidelity provides a framework for assessing your retirement savings progress based on your age.

The framework includes saving your salary until age 30, which then increases to double your salary at age 35, three times at age 40 and continues to increase to the 10-fold target at age 67 .

“It may or may not be feasible, depending on where you are,” Assaf said of the savings goals. “But it just gives a simpler view of what to do.”

The framework assumes that the investor will start saving at the age of 25 and save 15% per year.

A recent Vanguard retirement study recommends that workers increase their annual retirement savings rate to 12% to 15% of their income and invest in an age-appropriate asset allocation. This can help improve their sustainable investment rate – the highest level of pre-retirement income they can replace.

“I would much rather have clients who save 15% of their income and get a 5% rate of return than save 1% of their income and get a 15% rate of return,” Roland said.

He said that to save money, you don’t have to spend it, a concept highlighted in the book “The Millionaire Next Door.”

“A lot of people who have significant wealth, you’ll never know because they don’t look visibly wealthy,” Roland said.

“These are people who, through saving and accumulating wealth, have often accumulated more than they imagined,” he said.

If setting your retirement savings deferral rate to 15% now seems too financially complicated for you, you can instead try increasing your contributions by 1% per year. Experts say incremental increases can make a big difference in the long run.