US Retirement Benchmark: Many workers in the United States now believe they need $1 million to retire comfortably. A new Betterment at Work report shows that 48% of employees say this amount is necessary for financial safety in old age. Last year, that number was 37%, so the belief has grown fast.
At the same time, many people do not feel confident they will ever save that much. In fact, 54% of workers say they have thought about delaying retirement because they are scared their savings will not be enough. People are living longer, and retirement can last for many years.
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Is $1 Million Enough?
Today $1 million is no longer seen as a big dream number. For many people, it has become a simple starting goal. Workers are thinking about living longer and facing higher prices when they decide how much money they should save.
“For many retirement savers, the $1 million figure has become less of a ‘nice-to-have’ and more of a baseline, though retirement goals are never one-size-fits-all,” said Mindy Yu.
There are a few main reasons why people now think this way. Taxes, inflation, and longer life spans all play a part. When someone takes money out of a retirement account, they must pay normal income tax on it. That means they do not get to use the full amount. At the same time, prices keep rising, especially for healthcare, which can be very expensive in old age.
Yu explained that even $1 million may not stretch as far as many expect. “When factoring in that the net amount,” Yu continued, “[we] must now last several decades in an environment where we’ve experienced elevated inflation in recent years, and the cost of living – especially healthcare – continues to climb, $1 million can quickly start to look like a conservative estimate.”
Having enough for retirement depends on more than just a savings balance. Some retirees get money from Social Security, pensions, or other steady payments. If those cover basic bills, then personal savings only need to fill the gap for extra comfort or fun activities. Where someone lives also makes a big difference for example a million dollars can last much longer in a low-cost state than in expensive places like New York or California.
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Most Americans are far from $1 Million
Even if $1 million has become a popular target, most people are still far from it. Just 3.2% of retirees have saved that much money. For families between ages 65 and 74, the average retirement savings is around $609,000. The median amount is much lower, at only $200,000.
When we look at the whole country, the picture is similar. Only about 2.5% of all Americans have $1 million or more saved in retirement accounts. Even among those who actually have retirement accounts, just 4.7% have reached the $1 million mark.
