The new line going around that people are happy with a $100,000 retirement is a statistical myth just as sketchy as the perfect $1 million retirement — or the $1.46 million retirement, given inflation. Pick a number, add or subtract zeros, and there is likely some statistic to support your retirement philosophy that may or may not align with reality.
The numbers aren’t fake, but they don’t represent actual people’s retirement budgets, either. The $100,000 number, for instance, originally comes from an analysis of government survey data that proliferated online. The $1.46 million is from a survey by Northwestern Mutual. These big, broad headline results come from the statistical analysis of retirement surveys, most of which mix quantitative questions with ones about feelings.
It’s concrete when you ask a person’s age, retirement status and retirement savings. But it’s something a little different when you correlate that with answers from sentiment questions. For example: Overall, which one of the following best describes how well you are managing financially these days?
This is a key question the Federal Reserve asks on its Survey of Household Economics and Decisionmaking every year, which examines 11,000 American adults on a variety of household financial topics. The 2023 report found that 80% of those 60+ said they were doing at least OK financially — a higher share than for U.S. adults overall, which was at 72%.
The Fed didn’t correlate this result to any particular grand retirement theory of happiness with savings topping out at $100,000. What happened to get to that number was a little more academic than that.
Andrew Biggs, a fellow at the American Enterprise Institute, looked at several past years of this Federal Reserve data in an op-ed in the Wall Street Journal and for upcoming research projects. He broke down the age and income distributions by downloading the raw data and filtering it. Then he was able to set up a chart that showed the income distribution of those in the group of early retirees, aged 65 to 75, who answered the feelings questions above either as “living comfortably” or “doing OK” — the downside answers were “just getting by” and “finding it difficult to get by.”
The magic number? The study found 86% of those with $50,000 to $99,999 in savings were at least doing OK.
That’s when things start to get a little confusing. Some of Biggs’s fellow retirement thinkers took issue with his reasoning and his agenda, such as Teresa Ghilarducci, a professor of economics at the New School in New York. Their beef is more about whether or not there really is a retirement crisis in America, rather than over any particular statistic. Ghilarducci thinks there is, and Biggs thinks there isn’t, to simplify it.
But as they, and a few others, sparred in op-eds and social media, the $100,000 number achieved a bit of its own status, with a little “game of telephone” distortion going on as it got shared and passed along in places like Yahoo and other syndication sites.
Biggs wasn’t surprised to learn of this, as it happens all the time. “You read a lot of factoids, but even while they’re technically true, they’re lacking in context. It’s like that line from ‘The Princess Bride’: ‘I do not think it means what you think it means,’ ” Biggs said in an interview with MarketWatch.
So is $100,000 really enough for retirement?
It might seem easier to make the case for the bigger retirement savings numbers, but the trap you fall into is that the numbers may be too aspirational for what’s really happening out there. Then the headlines blare that we’re in a retirement crisis, because actual people are not saving that much, and thus falling short.
At $100,000, which is closer to the average retirement savings of a typical American, budgets are tight. At 65, you would have $750 a month in income that might last 20 years, roughly, at a 7% growth rate. That’s not a lot, but might be doable if a household added it to two robust Social Security checks.
There are a lot of ifs in that scenario, though. It all depends what you’re talking about in terms of that nest egg and what you mean by “OK.” When it comes to real people, you need to ask a lot more questions.
What do you count as savings, exactly? Does it include home equity, pensions, family contributions and continued work income? If you have $100,000 and are still working, for instance, you could leave those funds alone and they could double in 10 years, and then you’d be much better off, especially if you could wait until 70 to claim Social Security and get your maximum benefit.
And the most important question might be: What were you making before? The amount you have saved, and much of your feeling of well-being, only means something in relation to your pre-retirement lifestyle and how you can maintain it in retirement. You’re not in a race against hypothetical average people conjured from survey data.
The goal, said Biggs, “is that you want a standard of living in retirement that’s smooth — not feast and famine. You should not be looking at other people.”
So when you think about what you should make of the numbers you read when you click on retirement-survey stories, you should think mostly of your own situation.
We should all be more interested in the questions asked than the answers. When it comes down to it, if you were participating, you would be one line out of 11,000 on a spreadsheet, and yours is basically the only line that matters to you. You might be better off skipping the stories about the surveys, clicking through to the survey itself, finding the list of questions asked and doing your own personal analysis.
Then you would have the answer to how you feel about your retirement — and that’s the one that would really matter.
