If you want to retire in comfort, investment firms and news headlines tell us, you may need $1 million in the bank.
Or maybe not. One prominent economist says you can retire for a lot less: $50,000 to $100,000 in total savings. He points to the experiences of actual retirees as evidence.
“You Don’t Need to Be a Millionaire to Retire,” says the headline of a column by Andrew Biggs, a senior fellow at the American Enterprise Institute think tank, and published in April in The Wall Street Journal.
Most Americans retire with nowhere near $1 million in savings. The notion that we need that much money to fund a secure retirement arises from opinion polls, personal finance columns and two or three rules of thumb that suffuse the financial planning business.
Financial advisers tell you to save 10 times your annual salary for retirement, enough cash that you can live on 4% of the balance for a year. In one widely reported survey, Americans said they would need $1.46 million in the bank to retire comfortably.
Most retirees say they’re doing just fine, thank you
Biggs disagrees. To prove his point, the economist looked at responses to the federal Survey of Household Economics and Decisionmaking between 2019 and 2022.
The survey asked retirement-age Americans, 65 to 74, how well they were managing financially.
A majority, roughly 85%, said they were just fine: They were living comfortably, or at least “doing OK.”
Only 15% said they were struggling.
The finding matters, Biggs says, because most retirees have much less than $1 million in the bank. In the federal survey, the typical senior who reported a satisfactory retirement had $50,000 to $100,000 in savings.
“It’s impossible to find any evidence that seniors need even a fraction of $1.46 million in savings to be financially secure,” Biggs wrote.
By his argument, retirees don’t need nearly so much savings as financial planners say they do.
The average couple who retired in 2022 reaped nearly $46,000 in annual Social Security benefits, by Biggs’s calculations. While that sum is “hardly extravagant,” he wrote, “a typical couple can expect an income more than twice the elderly poverty threshold before they touch a penny of their own savings.”
