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Is That $ 1.8M Retirement ‘ Magic Number ’ Just Clickbait ?
Financial planners say headlines telling people they need a million or more to retire do more harm than good . By Jacqueline Sergeant
WE HAVE ALL SEEN OR HEARD ABOUT THE “ magic number ” that Americans need to achieve when saving money to live comfortably in retirement . Recent surveys from Northwestern Mutual , Charles Schwab and others have shown the number to be anywhere from $ 1.5 million to $ 1.8 million . Those amounts have been steadily growing over the years .
In April , a Northwestern Mutual survey found that Americans believe they will need $ 1.46 million in retirement . That ’ s a 15 % increase from the $ 1.27 million reported last year , and a 53 % hike from the $ 951,000 target they had in mind in 2020 .
In a report released by Schwab in July , survey respondents targeted $ 1.8 million as their retirement savings need . That was the same response given a year ago , but the figure was up from $ 1.7 million the previous year .
Those million-dollar figures , however , have left many , including professional planning experts , scratching their heads .
“ Who the heck did they ask ?” remarked one reader who goes by the social media handle “ jrpower ” and often leaves comments after reading these survey stories on Financial Advisor ’ s website .
As it turns out , the reader is John Power , a semi-retired financial planner in Walpole , Mass ., who has been practicing for 33 years .
“ I don ’ t know where these people get their idea of how much money they need for retirement ,” Power said when Financial Advisor reached out to him . “ I did a lot of retirement plans , and I can tell you this : Almost nobody that I worked with has figured it out for themselves . They don ’ t do the work , they don ’ t know their financial situation , and they just don ’ t understand the components to figure it out .
“ And so , when you do a survey of people that really don ’ t know what they are talking about , then you get an answer that is not meaningful ,” he concluded .
Power added that he gets annoyed seeing such stories because he knows better . “ I know from personal and professional experience that information like that isn ’ t useful , and we need to be useful to people ,” he said , noting that there isn ’ t any one number when it comes to retirement because “ it ’ s different for everyone , and so you can ’ t make any kind of critical estimate .”
Aaron Cirksena , founder and CEO of MDRN Capital in Annapolis , Md ., agrees . “ People feel like they should either have $ 1 million or $ 2 million , some magical round number like that . But there is no magic number . … It ’ s not $ 1 million , it ’ s not $ 1.6 million , it ’ s not $ 2 million or $ 3 million . There is no number .”
Cirksena explains that he has clients with $ 5 million in savings who have higher income needs for
48 | FINANCIAL ADVISOR MAGAZINE | DECEMBER 2024 WWW . FA-MAG . COM