Do you actually need $1.46 million to retire comfortably?

Up until retirement, most of what you budget for in life is pretty straightforward. You can set up savings goals to put a certain percentage down on a new home purchase. You might have a fraction of your income filtering into a 529 college savings plan for your kids’ education, or a preset number of dollars rerouted to savings to pay for a vacation.

But the formula for how much to squirrel away for retirement is tricky and loaded with lots of variables. What will your lifestyle be like? How much will inflation be? And, for millennials and younger generations, there’s the looming question of what Social Security benefits of the future will look like if reserves run dry in the next decade.

So, how much money do you need to have saved for retirement? That’s the million-dollar question that most Americans believe will actually cost them more than a cool million, according to a new study from Northwestern Mutual. The financial services company found that Americans think they’ll need $1.46 million saved in order to retire comfortably. This figure is an all-time high, and up from $1.27 million when Northwestern Mutual did a similar survey last year. In 2020, survey respondents thought having $951,000 stashed away for retirement would provide a good enough cushion.

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The study, which involved surveying 4,588 U.S. adults in January 2024, also found that Americans across the board have on average $88,400 saved for retirement.

“People’s ‘magic number’ to retire comfortably has exploded to an all-time high, and the gap between their goals and progress has never been wider,” said Aditi Javeri Gokhale, chief strategy officer, president of retail investments and head of institutional investments at Northwestern Mutual, in a press release. “Inflation is expanding our expectations for retirement savings, and putting the pressure on to plan and stay disciplined.”

But do you really need nearly $1.5 million saved up for a comfortable nest egg? Simplemost asked certified financial planners and retirement experts about magic numbers. Not surprisingly, retirement goals are subjective and personal, so while a certain figure may be more than enough for some, it may fall short for others. In some scenarios, you may need just a fraction — about $500,000 saved — for a comfortable retirement, one expert told us. Here’s what experts have to say about the “magic number.”

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How Much Do You Really Need Saved for Retirement?

The amount needed for retirement, also known as the “magic number,” depends on personal and financial circumstances, says Marguerita Cheng, CFP, and expert contributor for Annuity.org, an advocate for financial planning.

For example, what will your expenses be in retirement? Consider both your essential expenses and your lifestyle and variable expenses, she says.

Then, you can assess how much income you can expect to receive once you retire. Are you eligible for income from a pension? Do you have a spouse, partner or family member who will help offset living expenses? Other considerations include when you’ll start receiving Social Security benefits. What are your savings and investments? If you feel more comfortable with increasing their sources of guaranteed lifetime income, you can consider annuities.

“Some individuals can retire with $500,000 in savings and investments if they defer Social Security to full retirement age and own their home outright,” Cheng says.

Others may need to downsize to reduce costs associated with having a larger home, such as property taxes, utilities and maintenance, she adds.

One of her best tips: Don’t forget to consider the impact of taxes and inflation.

To offset costs, some might even relocate to a state with no state income tax. Nine U.S. states have no income tax, according to AARP. They are: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming.

What Else to Consider When Saving for Retirement

Studies often attempt to offer an average or ballpark figure for retirement, but generalized numbers can be misleading, cautions Chad Gammon, a financial planner at Arnold and Mote Wealth Management. That’s because they fail to factor in things like lifestyle, where you’ll retire, life expectancy, how much inheritance you want to leave behind and other variables.

Relying on these average figures, he says, can lead to financial anxiety or misplaced confidence.

“Those who find themselves below the threshold might worry unnecessarily about their ability to retire, while those above it might falsely assume they are completely free of financial concerns in retirement,” Gammon says.

Northwestern Mutual’s findings that reveal Americans’ nest egg aspirations are at a record high comes at an interesting time. Inflation has slowed to under 3%, down from over 9% in June 2022, and 401(k) balances have been shooting up. The average 401(k) account balance, according to figures from Fidelity, was $118,600 in the final quarter of 2023, which is a 14% increase from the year prior and up 24% since 2018.

Ask Yourself the ‘Magic’ Question

People often ask themselves, “Do I have enough to retire?” But the better question to ask yourself first is: “How much will I be spending in retirement?” says Chris Urban, CFP, and founder of Discovery Wealth Planning.

It’s also wise to consider what type of accounts your investments are in, he says.

For example, is your money in tax-deferred accounts like 401(k)s and a Traditional IRA, which will be reduced by taxes when money is withdrawn? Or, do you have cash stashed away in Roth accounts where qualified withdrawals will not be taxed? Do you have money in regular taxable brokerage accounts that might be able to take advantage of capital gains tax rates in some situations?

To get a ballpark figure, there are a number of retirement calculators online that ask questions about how much you have in savings, what age you want to retire, what percentage of your current salary you think you’d be comfortable living off of and more.

But your best bet for a more tailored “magic number” goal, is to meet with a financial planner who can take your unique situation into consideration to help you plan for the future.