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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 penned 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.
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.
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By his argument, retirees don’t need nearly so much savings as financial planners say they
do.
The average couple that 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.”
Biggs says retirement planners overstate how much income retirees actually need, and how
much they will spend, essentially as a way to drum up business.
Reactions to Biggs’s column ranged from admiration to outrage. Some readers reposted the
piece on X with praise. One critic quipped, “You don’t need to be a millionaire to retire and do
NOTHING!!!”
Biggs is a noted conservative economist and something of a contrarian. Earlier this year, he
and a colleague sparked outrage with a paper that argued for eliminating the 401(k) plan.
His new assertion, that people don’t need a million dollars to retire in comfort, flies in the face
of common wisdom in the retirement planning industry.
“What about rising health care costs?” said Lili Vasileff, a certified financial planner in
Greenwich, Connecticut. “What about more older adult children living for free with older
parents? What about divorces in later life that halve all assets on the cusp of retirement?”
Perhaps the most provocative claim in Biggs’s analysis is that only a few retirees face
financial challenges.
Alicia Munnell, director of the Center for Retirement Research at Boston College (and a past
collaborator with Biggs), estimates that at least two-fifths of retirees are struggling financially.
In the 2022 edition of the federal Survey of Consumer Finances, when seniors were asked
how they would handle a financial emergency, only 58% said they could rely on savings. To
Munnell, that figure reflects the depth of financial insecurity among retirees.
Why, then, did only 15% of seniors in the other federal survey, cited by Biggs, say they were
struggling?
Munnell thinks many retirees are reluctant to discuss their financial problems in surveys.
“When people are asked about their well-being, I think there’s a certain pride,” she said. “You
don’t want to say, ‘I really screwed up.’”
Though Munnell disagrees with Biggs on the financial well-being of American retirees, she
applauds his stance that you don’t need a million dollars to retire.
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“I don’t think it helps to hold out unrealistic savings goals and to exaggerate how much
money people need to fund a comfortable retirement,” she said.
The million-dollar retirement is a frustrating quest, Munnell said, because most of us do not
retire as millionaires.
The typical senior with a retirement account has about $200,000 saved, according to data for
households in the 65-74 age range from the 2022 Survey of Consumer Finances.
But only about half of those households report having retirement accounts at all.
On this point, Biggs and his colleagues disagree. He contends that many seniors have other
kinds of savings, not to mention pensions. Munnell believes that Biggs is overconfident in the
security of American retirees.
“I don’t know people, really, who have retirement savings who don’t have a retirement
account,” she said.
Retirement experts often say people will need about 80% of their preretirement income to
fund their retirement years.
Social Security covers only about half of that, according to the Social Security Administration.
And so, for a comfortable retirement, we are urged to save.
One rule dictates that we should try to save 10 times our annual salary to supplement our
Social Security income. For a typical American household, that comes to nearly $750,000, or
10 times the median household income of $74,580.
And then there is the 4% rule: Plan to withdraw 4% of your retirement savings to cover your
annual living expenses, adjusting the figure for inflation each year.
Some experts say 4% is too low; others contend it’s too high. Either way, the message is
clear: If you are going to live on a single-digit percentage of your retirement savings, you will
need a lot of it.
Biggs believes those rules exist largely so that investment houses can sell investment
products, and so personal-finance websites can attract pageviews.
He points to the 80% rule: Not many retirees, he reasons, will ever spend that much of their
working income in retirement.
“For a long time, 70% was the recommended mean for middle-income retirees,” he said in an
email to USA TODAY, “and it’s crept up without (to my mind) particularly strong evidence.”
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The 4% rule is a little harder to critique, he said, “but one thing we now know is that retirees
reduce their spending pretty significantly as they age.” Older retirees travel less, eat less and
spend less on children, Biggs said. Medical costs rise, but insurance covers most of them.
Retirement experts say the guidelines are meant as aspirational goals for working people to
plan their retirement.
“Those rules of thumb are helpful for folks in their early career, their mid-career,” said
Douglas Ornstein, a director with TIAA Wealth Management, part of the financial services
nonprofit. “By the time you’re five years out from retirement, those rules are probably not so
helpful anymore.”
No two retirements are alike, financial advisers say. Some retirees are still making mortgage
payments or supporting grandchildren. Others have neither dependents nor debt.
“If you’re living in Manhattan, yeah, you probably need a million dollars, if not more,” said
Christopher Lyman, a certified financial planner in Newtown, Pennsylvania. “If you’re living
out near Lancaster, Pennsylvania, with the Amish, there’s not a lot going on down there. If
you’ve got $50,000, you’re probably OK.”

Source: https://www.yahoo.com/finance/news/really-1m-retirement-savings-not-091427748.html