You’ve probably heard that you’ll need at least $1 million in savings to retire. But you may have also seen reports indicating Americans aren’t saving enough for retirement.
And given that Americans typically believe they’ll need $1.46 million to live comfortably in their golden years, according to a study from Northwestern Mutual, this could be true.
The same study found baby boomers and older Americans report having only $120,300 in savings on average.
This is on track with the most recent stats from the Federal Reserve: the median amount that Americans aged 65 to 74 have in dedicated retirement accounts is only $200,000, as of 2022. Those aged 75-plus have a median $130,000 in their accounts.
However, the Fed’s most recent Survey of Household Economics and Decisionmaking shows 82% of retirees aged 65-plus who reported that their savings were less than $1 million also reported that they’re doing OK — or even living comfortably. In fact, of those who reported savings of only $50,000 to $99,999, 81% said they’re doing OK or living comfortably.
So how are they doing it? Here are a few reasons why you could still live comfortably in retirement, even without a $1 million nest egg.
You may have other income sources
Aside from their retirement savings, many retirees have other income sources. For example, in 2023, 80% of retirees aged 65-plus reported one or more sources of private income, such as from a pension, employment or interest, dividends or rental income, according to the Fed’s survey.
Retirement savings are often used to supplement Social Security benefits — which came to an average $1,916 a month in May for retired workers, data from the Social Security Administration shows.
This works out to about $23,000 per person over a 12-month period, or $46,000 for a couple — more than double the poverty threshold of $18,440 for a two-person household with at least one householder aged 65-plus, according to the Census Bureau.
Retirees with decent savings coupled with incoming funds from their investments or part-time gigs could be covering their expenses while living quite comfortably.
You may have fewer expenses
A study published in 2019 by the Employment Benefit Research Institute showed that total expenditures tend to drop as the people get older.
By the time you retire, it’s likely that your kids will have left home and your mortgage will be paid off (or close to it), so you’ll need much less to live on. You also may not spend as much on transportation since you no longer have to commute to work. LendingTree reports the average annual expense to raise a child was $21,681 in 2021 — and that’s just for the essentials, like food and clothing. Meanwhile, the Mortgage Bankers Association says the median mortgage payment for a new application was $2,219 in May 2024.
If your adult children are self-sufficient and you’ve paid off your mortgage before retiring, you could free up a small fortune each year.
You may have different priorities
While it seems many Americans may not need $1 million in retirement savings to live comfortably, there’s no one-size-fits-all approach.
You’ll need to assess your expenses and how those could change in retirement. If you have a pension through work, bring in rental income or plan to work part-time in your golden years, you may need less money in the bank than you think.
And, if you plan to retire in a region or state with a lower cost of living — or a state with no income tax — that will also factor into your retirement budget, especially if you plan to downsize to a smaller home.
At the same time, if you have health issues or there’s a possibility that you or your spouse will need to move into a long-term care home, you’ll want to save enough to support additional medical expenses not covered by Medicare. Life is unpredictable — we can’t know for sure if and when our health will fail, so it’s well worth budgeting extra money for unforeseen medical expenses.
If you’re unsure of how much you should be setting aside for retirement, a financial adviser, or online financial calculators, can give you an idea of how much you’ll need to save to supplement your other income sources. From there, you can set your retirement goals and create a plan to reach them — whether or not that means saving $1 million for your golden years.