The short answer? It all depends.
When it comes to retirement savings, different people set different goals. However, you will frequently hear people claim that $1 million in savings is all that is required to retire comfortably.
The good news is that amassing a $1 million 401(k) or IRA isn’t so difficult, especially if you start funding that account at a young age and invest your savings wisely. But is $1 million really the right number to aim for? Will a $1 million emergency fund actually cause you to fall short?
It all boils down to your personal objectives.
A $300,000 nest egg may provide a comfortable lifestyle for some seniors. Others may have to compromise on plans and goals if they have a $2 million nest egg.
As a result, it’s difficult to say whether $1 million is enough to retire on. Much of this will be determined by factors such as:
How your Social Security benefits appear
What kind of lifestyle you want to live and how you want to spend your days
What other sources of income do you have?
Whether you split the $1 million with your spouse or have it all to yourself
The more income you receive from Social Security, the less reliant you may be on your savings. As a result, a $1 million nest egg may be adequate if you are eligible for a $2,500 monthly Social Security benefit, but not so much if you are eligible for a $1,500 monthly benefit.
Your retirement plans will also determine how much income you require. If you plan to downsize your home and spend the majority of your free time gardening, hiking, and working on home improvement projects, you may not require the same nest egg as someone who plans to keep a larger property and travel overseas six times a year.
Furthermore, you may have additional income sources for retirement, such as rental income from a second home or a hobby that you intend to monetize. If you are receiving $2,000 per month from either source, you may not need as much money in your nest egg.
Finally, if you are single, you will only be responsible for your own healthcare, food, and entertainment expenses. If you’re married, the costs could be doubled. That means you may need to increase your savings to cover them.
What is the correct decision?
It’s common to believe that $1 million is the ideal retirement savings goal. Instead, evaluate your personal needs and income sources to determine how much to save.
You might decide that $1 million is the best retirement plan balance for you. But there’s nothing wrong with deciding to aim higher if you’re willing to put in the effort. And if you believe that a $500,000 nest egg will suffice for your retirement, there’s no need to make sacrifices that will make you unhappy in order to double that amount.