RETIREMENT
$1M Is No Longer the Standard Nest Egg Here’s how much most Americans think you actually need to retire By Gabrielle Olya
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common financial rule of thumb is that you should have $1 million saved for retirement, but this piece of advice may now be outdated — you may actually need roughly double that. At least, that’s what most 401(k) plan participants believe. A recent survey conducted by Schwab Retirement Plan Services found that on average, plan participants think they need to save $1.9 million for retirement. But how accurate is this number? Nathan Voris, director of business strategy at Schwab Workplace Financial Services, thinks that the survey participants have a pretty accurate idea of how much they will need in retirement. “I think for a survey like this, that’s a pretty good number,” he said. “That’s a ballpark range for a wide range of folks. Obviously, retirement is not one-sizefits-all, but that’s sort of the middle of the range for a lot of people.” As Voris notes, there are numerous factors that will affect how much someone will actually need in retirement, so some may need more and others may need less. “There’s so much written about
that, but I boil it down into just a couple of things. One is, when do you want to retire?,” Voris said. “If you’re going to retire at 50, you need to plan for 45 years of living expenses. If it’s 67, you need to plan for 30 years. That has a huge factor in what your plan should be.” “One of the other levers is, what lifestyle are you going to have in retirement?” he continued. “Where are you going to live? Are you going to live in California or Wyoming? Think about the state tax perspective. Are you going to have an active lifestyle? Or are you living close to grandkids where you’re going to be pretty local? There’s a lot of factors in what level of lifestyle you want to live in retirement.” Finally, how much you need to have saved for retirement will depend on your other sources of income in retirement. This includes Social Security, pensions, assets and inheritance. “Those kinds of things can be a factor in what the retirement future looks like,” Voris said.
Why $1 Million Is No Longer Enough
68 OSWEGO COUNTY BUSINESS OCTOBER / NOVEMBER 2022
There are a number of factors that may require retirees to have a larger nest egg saved up, but one of the main ones is that people are living longer in retirement. “Retirement could be a long time,” Voris said. “That idea of 20 years in retirement, that was maybe tied to that $1 million number. That’s sort of not a realistic expectation anymore. That 4% rule, that $80,000 income bogey is still out there, but you could be retired for 25, 30, 35 years.” “If you tell someone they need to save $1.9 million, that can be daunting on the surface. But there’s a way in which you do that through planning and decision-making processes that makes it attainable,” Voris said. The first step is simply making the choice to be an active participant in your financial planning. “Be your own advocate. Be engaged. Start early. Take it seriously. Have a plan,” Voris said. “The attitude toward finances in retirement when you have a plan versus not is night and day.” If you’re just starting out, be sure you’re not leaving any free money on the table. “Make sure that you’re getting every penny
