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Whether you can retire on $1 million depends on your lifestyle, location, and other retirement income sources. However, relatively few people reach this benchmark. In fact, less than 5% of Americans have $1 million saved for retirement, according to an Employee Benefits Research Institute analysis of Federal Reserve data. This figure highlights how uncommon seven-figure nest eggs are, even as the cost of retirement continues to climb.
A financial advisor can help you maximize your retirement savings.
What Does the Typical Retiree Have Saved?
The vast majority of Americans do not have $1 million in retirement savings. Using data from the Federal Reserve’s most recent Survey of Consumer Finances, EBRI calculated that only 4.7% of Americans have $1 million in retirement accounts. That percentage drops to 1.8% for the $2 million threshold and 0.8% for $3 million.
So how much do retirees have in savings, on average? According to the Survey of Consumer Finances, the average retirement savings of households led by someone between 65 and 74 years old was $609,230. That figure dropped to $462,410 for the 75-plus age group.
As you can see, those numbers fall well below $1 million. They show how much the average household aged 65 or older has saved in retirement accounts, including 401(k) plans and individual retirement accounts (IRA).
If you look at median figures, the numbers change even more. The median represents the middle number in a group of numbers. The Federal Reserve data shows that the median retirement savings of households led by someone between 65 and 74 years old was $200,000 and $130,000 for those 75 and older.
| Age | Average Retirement Savings | Median Retirement Savings |
| 65–74 | $609,230 | $200,000 |
| 75+ | $462,410 | $130,000 |
What Is the Average Retiree’s Net Worth?
Net worth is a measurement of your assets against your liabilities. A higher net worth indicates that you have more assets than debts and that’s a good thing when it comes to retirement.
In terms of the average retiree’s net worth, the Federal Reserve data puts it at approximately $1.78 million for those aged 65 to 74. The average net worth drops to $1.62 million for those aged 75 and older. The data measures a variety of assets and debts, including:
- Retirement accounts
- Bank account balances
- Certificate of deposit (CD) accounts
- Savings bonds
- Stock holdings
- Cash value life insurance
- Managed assets
- Business equity
- Unrealized capital gains
- Primary mortgage debt
- Home equity loans and lines of credit
- Student loans
- Vehicle loans
- Credit cards
- Other installment debt
If you’d like to calculate your own net worth, you’d simply add up all of your assets and subtract your debts. You can use that number as a guide for measuring your own net worth alongside other Americans in your age group.
How Much Income Does $1 Million Generate in Retirement?
A common question among retirees and pre-retirees is how much monthly income a $1 million investment portfolio can produce. The answer largely depends on your withdrawal rate, investment returns, and how long you expect your savings to last. The “4% rule” is often used as a starting point, but there are other approaches worth considering.
Here’s how different withdrawal rates might translate into annual and monthly income:
| Withdrawal Rate | Annual Income | Monthly Income |
| 3.5% (conservative) | $35,000 | $2,916 |
| 4% (moderate) | $40,000 | $3,333 |
| 5% (aggressive) | $50,000 | $4,166 |
A 3.5% withdrawal rate may provide more security over a 30-year retirement, particularly if markets underperform or inflation rises. Meanwhile, a 5% rate may increase your short-term income but raises the risk of depleting your savings too soon.
Factors such as your investment mix (stocks vs. bonds), inflation, and longevity all play key roles. For instance, a retiree with a diversified portfolio that includes equities may see stronger long-term growth, but they must also prepare for short-term market volatility. Working with a financial advisor can help you determine the best withdrawal strategy based on your personal goals and risk tolerance.
Why Your Withdrawal Amount Isn’t Your Actual Income
The figures in the table above are gross withdrawals, not what actually lands in your pocket. If your $1 million sits in a traditional 401(k) or IRA, the type of account most of the savings figures cited earlier in this article are based on, every dollar you withdraw is taxed as ordinary income in the year you take it out.
This means a retiree withdrawing $40,000 a year under the “moderate” 4% approach won’t actually have $40,000 to spend. Depending on their tax bracket, filing status, and whatever other income they have coming in, such as Social Security, a pension or part-time work, a meaningful portion of that withdrawal could go straight to federal and possibly state income tax before a single bill gets paid.
Roth accounts work differently. Because Roth contributions are made with after-tax dollars, qualified withdrawals in retirement are generally tax-free, meaning a Roth withdrawal of $40,000 actually puts the full $40,000 in your pocket. Retirees who split their savings between traditional and Roth accounts have more flexibility here, since they can choose which pool to draw from based on their tax situation in a given year.
This is one more reason the withdrawal-rate table above should be treated as a starting point rather than a finished budget. Before assuming a $1 million portfolio at a 4% withdrawal rate will comfortably cover $40,000 in annual spending, it’s worth running the numbers on what you’d actually owe in taxes, and a financial advisor or tax professional can help you estimate that more precisely based on your specific account mix and tax situation.
Is $1 Million Enough to Retire?
Financial experts have long advocated saving at least $1 million for retirement. Whether $1 million is enough can depend on:
- Your desired retirement age
- How long you expect to live in retirement
- Your preferred retirement lifestyle
- What you expect to spend on basic living expenses and healthcare
- When you plan to take Social Security benefits
For some retirees, $1 million may be more than enough to enjoy a comfortable lifestyle. Retirees who move abroad may find $1 million stretches further for housing, food, utilities and healthcare. They might be able to retire on $500,000 instead.
On the other hand, $1 million may leave you with a savings gap if you would like to live a retirement lifestyle that includes plenty of travel, expensive hobbies or providing financial support to a child or grandchild. Health care can also take a big bite out of your savings if you have a chronic illness or you require long-term care at some point.
Long-term care is generally not covered by Medicare. While you can apply for Medicaid to pay for long-term care, eligibility is determined by your assets. If your net worth is high, you may need to spend down your assets to qualify. Buying long-term care insurance or a hybrid policy helps you prepare financially for that scenario.
Find out if you’re on track for the amount you need to retire:
How to Save $1 Million for Retirement
If you’d like to save $1 million or more for retirement, you’ll need a clear plan to reach your goal. Planning starts with doing some math to determine how much you need to save monthly or yearly to reach your goal, based on when you plan to retire.
Say you’re 30 and plan to retire at 65 with $1 million. You earn $70,000 a year and are starting from zero. If you invest consistently and earn an average 7% annual return, saving 10% of your income, about $583 a month, could get you there. If you start at 35 instead, you’d need to save 15% of your income, or roughly $850 a month, to stay on track.
Using an online retirement savings calculator can help you work out how much you need to save to retire with $1 million. You can also try some of these tips to boost your savings total:
- Contribute to your 401(k): Aim to earn the full employer match if it’s available.
- Increase contributions with raises: Automatically boost your savings rate whenever your income goes up.
- Max out your workplace plan: If possible, hit the annual limit and consider a SEP IRA or solo 401(k) if you’re self-employed.
- Open an IRA or HSA: Use these accounts to supplement savings and access additional tax benefits.
- Claim the Saver’s Credit: If you’re eligible, this tax credit can reduce what you owe and help you save more.
- Review investment fees: Choose low-cost funds and monitor expenses to avoid unnecessary drag on your returns.
- Save windfalls: Direct tax refunds, bonuses or rebates into your retirement accounts.
- Lower expenses and debt: Free up cash in your budget by cutting spending and reducing monthly payments.
Those are just a few things you can do to increase your savings efforts if you’d like to retire with $1 million. What you decide to do should be unique to what your individual financial goals are and how much money you think you need for your goals. A professional can help you build a personalized plan to reach your goals.
Bottom Line
While most retirees do not have $1 million in savings, reaching that amount may be possible with consistent contributions and a long-term strategy. Starting early provides more time for investment growth and compounding, while evaluating investment choices and risk tolerance can help shape an approach that aligns with your retirement goals. However, the amount needed for retirement ultimately depends on factors such as spending, income sources and lifestyle.
“The overwhelming majority of retirees do not have $1 million dollars. While that means many have undersaved, it’s possible to have a comfortable retirement depending on other resources and lifestyle choices,” said Brandon Renfro, CFP®.
Brandon Renfro, CFP®, RICP, EA provided the quote used in this article. Please note that Brandon is not a participant in SmartAsset AMP, is not an employee of SmartAsset and has been compensated. The opinion voiced in the quote is for general information only and is not intended to provide specific advice or recommendations.
Retirement Planning Tips
- Consider talking to a financial advisor about your long-term retirement plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- If you expect Social Security benefits to be part of your retirement picture, it’s important to understand how much you might be able to collect. You can receive your full benefit amount when you retire at your normal retirement age, but it’s possible to take benefits as early as 62. Doing so, however, can shrink the amount you’re able to receive. On the other hand, you can increase your benefit amount by waiting until age 70 to apply. Deciding when to take Social Security benefits is another topic you may want to discuss with your financial advisor.
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