The Realistic Minimum Retirement Savings Needed, According to Experts

You may have heard you need at least $1 million in the bank to retire. The truth is, a comfortable retirement will look different for everyone. Some people might need much more than that, and some might only need $700,000 to retire comfortably.

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So what’s a more realistic minimum number you should aim for?

Why the $1 Million Rule Doesn’t Work for Everyone

Retirement costs can look very different depending on where you live, how healthy you are, whether you have a mortgage, and what kind of lifestyle you want. For example, if you plan to retire abroad in Thailand, your retirement budget will look completely different than if you were to retire in New York City.

“People fixate on round numbers, but the right amount is personal,” said Ben Storey, retirement strategy director at Bank of America’s Merrill. “It depends on your income needs, location, and how long your retirement might last.”

“Tempting as it is to put a single number on retirement, the answer to how much you’ll need to save really depends on the life you expect to lead,” he added. If you need help figuring out what your number is, here are a few classic benchmarks financial planners use to estimate how much someone needs:

The 4% rule: This rule says you can you can safely withdraw 4% of your retirement savings in the first year, then adjust for inflation annually, ideally lasting for 30 years.Rule of 25: This rule is essentially the same as the 4% rule, but it works backward. Multiply your expected annual expenses by 25. That’s the rough amount you’d want savedSalary multiples: Some advisors suggest having 8 to 10 times your final salary saved by retirement. So if you make $120,000 a year, you should have at least $960,000 to $1.2 million saved up.

These aren’t hard-and-fast rules, but they can help you gauge how much you’ll need to fund your ideal retirement lifestyle. For example, using the 4% rule, you’d need around $600,000 to retire comfortably in Thailand, assuming you can live on $2,000 a month (4% of $600,000 is $24,000 a year). But if you plan to retire in a high-cost city like New York, where $6,000 a month is more realistic, you’d need closer to $1.8 million saved to maintain the same 4% withdrawal rate.

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Why It’s Safer To Save More Than the Minimum

Trying to retire on too little can backfire fast. A few reasons why:

You might live longer than expected: According to the CDC, the average lifespan in the U.S. is 78.4 years. So if you retire at 65, you’ll have to make your savings stretch for another 13 years or even more.Inflation: Inflation negatively affects the purchasing power of your savings, which means your savings might be worth less with each passing year.Health care isn’t cheap: According to the Employee Benefit Research Institute, retired couples may need as much as $428,000 in savings to be able to mostly cover their medical expenses, depending on their Medicare coverage level. This amount is likely to increase over time.Market downturns can hurt early retirees: If the first few years of retirement coincide with a recession, your portfolio can take a hit.

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