Nearly Half of Americans Say $1M Is Needed To Retire — Can They Get There?
Written by
Gabrielle Olya
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Molly Sullivan
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Nearly half of U.S. workers now believe they’ll need $1 million or more to retire comfortably — but most doubt they’ll ever hit that mark.
According to a new Betterment at Work report, 48% of U.S. employees think they’ll need over $1 million in retirement, up from 37% last year. In addition, the report found that more than half (54%) have considered delaying retirement because they don’t think they’ll have enough saved.
Here’s how much you actually need to retire — plus, what to do if you don’t think you’ll have enough.
Why $1 Million Is Becoming the Retirement Benchmark
While saving $1 million might seem like a pie-in-the-sky goal, you may actually need that much to retire comfortably.
“For many retirement savers, the $1 million figure has become less of a ‘nice-to-have’ and more of a baseline, though retirement goals are never one-size-fits-all,” said Mindy Yu, senior director of investing at Betterment at Work.
The reason that the $1 million is becoming a benchmark is rooted in the tax gap and the increasing longevity expectation.
“One million dollars in a traditional 401(k) account isn’t $1 million in your pocket,” Yu said. “Your withdrawals of funds are taxed as ordinary income.”
She also noted that retirement has become increasingly expensive.
“When factoring in that the net amount must now last several decades in an environment where we’ve experienced elevated inflation in recent years, and the cost of living — especially healthcare — continues to climb, $1 million can quickly start to look like a conservative estimate,” Yu said.
How Location and Income Streams Affect Your Retirement Needs
While $1 million can be a “magic number” for some retirement savers, it won’t fit everyone’s needs.
“For some, it may be more than they actually need,” Yu said. “That’s because retirement readiness isn’t just about your portfolio but your total income stream.”
If you have a solid floor comprised of Social Security and a pension, your portfolio only needs to bridge the gap between that floor and your desired lifestyle. If your basics are covered, you can afford to have a smaller nest egg.
How much you need to save also depends on where you choose to retire.
“You can change the math instantly with a geographic lever,” Yu said. “One million dollars in a high-tax, high-cost-of-living state like New York or California functions very differently than it does in a state with no income tax and lower property costs.”
Your focus shouldn’t be on a single “million-dollar” goal but the big-picture strategy that includes your long-term investing behavior, choice of investment accounts, asset allocation, diversification of income sources, and eventually the withdrawals, Yu noted.
Should You Delay Retirement To Save More?
Many Americans are considering delaying retirement to boost their retirement savings — and in some cases, this can be a savvy idea.
“Delaying retirement even briefly can be a smart financial decision if you’re behind on savings,” Yu said. “The good news is, it doesn’t have to be a drastic delay. Even working one to two extra years can often create a meaningful difference in your long-term finances.”
She recommended speaking with a financial advisor about your specific situation, but in general, Yu said a short delay can offer a “triple win”:
- It gives your existing savings more time to grow through compounding.
- It allows you to continue contributing to your retirement accounts.
- If you’re over 50, it lets you take advantage of higher catch-up contribution limits to help close the gap.
Smart Ways To Boost Retirement Savings Without Working Longer
If you’re behind on savings but want to avoid working longer, you’ll need to make the money you’re saving work harder for you.
“This starts with capturing every cent of your employer match — which is an immediate 100% return — and enabling auto-escalation so your savings rate climbs alongside your salary automatically,” Yu said. “It sounds simple, but 1 in 10 people with access to a match still aren’t contributing enough to get it. Over the years, that could be thousands left on the table.”
Being tax-smart will also fortify your retirement strategy.
“Avoid mistakes that can chip away at your hard-earned savings,” Yu said. “If you’re early in your career and expect your income — and tax rate — to rise, consider making Roth contributions to lock in tax-free growth. You pay taxes now, then enjoy tax-free growth and tax-free withdrawals in retirement.”
If you’re a high earner, maximizing traditional 401(k) contributions can lower your taxable income today, while keeping more money invested and compounding for the future.
“Over time, building a mix of different ‘tax buckets’ — pretax, Roth and taxable accounts — gives you more flexibility later,” Yu said. “In effect, you’re obtaining more control over your tax exposure in retirement by choosing which income sources to pull from and when.”
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