Different people set different savings goals when it comes to retirement. But you’ll often hear people say that $1 million in savings is enough to retire comfortably.
Well, the good news is that accumulating a $1 million 401(k), or IRA, isn’t actually that difficult — not if you fund that account from a young age and invest your savings wisely. But is $1 million really the number you should aim for? Or does a $1 million nest egg actually leave you short?
It’s about your personal goals
For some seniors, a $300,000 nest egg could make for a comfortable lifestyle. For others, a $2 million nest egg might mean compromising plans and goals.
As such, it’s difficult to say for sure whether $1 million is enough to retire. Much of this depends on factors such as:
- What your Social Security benefits look like
- What your desired lifestyle is and how you want to spend your days
- What other revenue streams are available to you?
- Whether you share that $1 million with a spouse or have it all to yourself
The more income you receive from Social Security, the less dependent you may be on your savings. And so, if you’re lined up for a $2,500 monthly Social Security benefit, a $1 million nest egg may be enough, but not so much for a $1,500 monthly benefit.
Your retirement plans also determine how much income you need. If you intend to downsize your home and spend most of your free time gardening, hiking, and working on projects around the house, you may not need the same nest egg as someone who is holding on to a larger property and six times want to travel abroad for a year.
Additionally, you may have outside sources of income available to you for retirement, whether it’s rental income from a second home you own or a hobby you want to monetize. Raising $2,000 a month from both sources could mean you don’t need as much money in your nest egg.
After all, when you’re single, you only have to cover your own health, food, and entertainment expenses. If you’re married, these things could cost double. And that means you might need more money in savings to cover them.
What’s the right call?
It’s easy to assume that $1 million is the best retirement savings to aim for. But instead of doing that, you should assess your personal needs and sources of income to determine how much you should save.
You may decide that $1 million is actually the ideal retirement savings for you. But if you decide you need to aim higher, there’s nothing wrong with that if you’re willing to put in the effort. And if you think a $500,000 nest egg is more than enough for your retirement, you don’t have to make sacrifices that will make you miserable to double that sum.