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How Many People Actually Have $1 Million Saved for Retirement?
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John Csiszar
August 31, 2023·5 min read
Delmaine Donson / iStock.com
Delmaine Donson / iStock.com

When it comes to saving for retirement, the common advice is to aim for
$1 million. This number has been cited so often that investors may feel
as if they’re failing if they don’t reach it. But that shouldn’t be the case. In fact, statistically, just 10% of Americans have saved $1
million or more for retirement. Don’t feel like a failure if your nest
egg isn’t quite up to the seven-figure level.

Regardless of your financial position, however, you should strive to
save and invest as much as you can. The larger your account balance, the
more comfortable your retirement will be. Here’s a look at what average Americans have saved for retirement, what your personal savings goal
should be and how you can build your balance faster.

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How Much Has the Average Retiree Saved?
While not all Americans will need to save $1 million to retire
comfortably, the unfortunate truth is that most Americans are behind
their goals, whatever they may be. The Federal Reserve Survey of
Consumer Finances records retirement savings data across different age
groups in the United States.

According to the survey’s most recent data, which was compiled in 2019,
here is the average amount of retirement savings for older Americans:

$426,000 for those 65 to 74 years old

$357,000 for those 75 and older

The data reveals Americans of retirement age have nowhere near $1
million in their accounts. And the truth behind these numbers may be
even more bleak. While the average amount of savings may be in the
$350,000 to $425,000 range, the reality is that some Americans have an abundance of savings while others have close to nothing. This skews the reported averages and pushes them higher.

According to the same Federal Reserve study, the median amount Americans
have saved, for example, is much lower:

$134,000 for those 65 to 74 years old

$83,000 for those 75 and older

In other words, the wealth of a few millionaires and multi-millionaires
skews the average readings higher, while the median paints a more
accurate picture of what average Americans have saved for retirement.

What Should Your Personal Retirement Savings Goal Be?
Personal finance is exactly that–personal. The amount of money you’ll
need to enjoy a comfortable retirement will vary greatly based on a
number of factors. Here are just a few that you’ll need to consider:

The cost of living where you want to retire.

The type of lifestyle you want to have.

Your ability to set aside current wants for long-term needs.

The rate of return you can get on your investments.

Your ability to live on a budget.

The size of your Social Security and/or pension checks.

If you plan to retire in Jackson, Mississippi, instead of Los Angeles or
New York City, for example, your cost of living will be considerably
less. Similarly, if your idea of a happy retirement is sitting on your
porch and reading instead of flying first class to Europe or traveling
around the world every year on a cruise, you can get by with much less
money. These are just some of the factors you’ll need to adjust for when creating your retirement budget.

One simple way to estimate how much you’ll need for retirement is to
create an accurate annual budget and then multiply that by your life expectancy. So, for example, if you think you can live on $50,000 per
year, you might want to accumulate $1.5 million.

However, this doesn’t take into account the earnings your account should
be generating every year. If you can earn an annual return of 6%, for
example, you’d only need to save roughly $700,000 to net a $50,000 in
income for 30 years.

This doesn’t even take into account things like Social Security, which
pays $1,837 on average every month, and potentially even more depending
on your work record and when you filed for benefits. If you factor in
that $1,837 per month–including an estimated cost-of-living adjustment
of 3% annually–you’d only need roughly $260,000 saved.

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How Can You Get Closer to a $1 Million Nest Egg?
Planning for retirement savings inherently carries a certain level of
risk. For starters, it’s hard to project how things will work out over a period of 30 years or more.

A long-term average investment return of 6%, for example, might start
out with years of -10% and -12%. This could severely impact your
long-term investment performance when you’re taking withdrawals every
year. But this doesn’t mean you shouldn’t take concrete steps to give yourself the best chance for success. Here are some of the most important:

Budget as accurately as you can.

Set aside as much as possible in tax-advantaged retirement accounts like
401(k) plans, especially if you have an employer match.

Understand the power of compound interest, and how saving $100 today
instead of spending it could translate to $500 or more in your
retirement account.

Invest prudently and consistently, especially in down markets.

Aim to set aside at least 10% to 15% of your income for your retirement savings.

Invest all “windfall” sources of income, such as tax refunds, raises,
and year-end bonuses.

While these steps won’t guarantee you’ll reach $1 million by the time
you retire, they will definitely help you maximize your savings.

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This article originally appeared on GOBankingRates.com: How Many People Actually Have $1 Million Saved for Retirement?

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