How Far $1M in Retirement Savings Will Go

 A recent study conducted by Western & Southern revealed that Americans believe they’ll need an average of $1,027,501 to retire comfortably. However, most aren’t confident in their ability to save that much. Especially not these days, with a whipsawing stock market and inflation having reached a 40-year peak last June. We’ll dig deeper into the study’s findings and explore what retirement realities look like for Americans, how different generations are thinking about retirement, and how they plan to achieve their retirement goals.

Generational Differences 

Western & Southern found that, overall, nearly 1 in 4 Americans felt uncertain about having enough money to sustain themselves once they stop working. In contrast, fewer than half (46%) felt confident about their retirement savings. They also saw a big difference in this confidence level between different age groups.

A whopping 61% of Gen Z (those born from 1997 to 2004) felt secure in their ability to retire. But just 44% of millennials (born 1981-1996), 37% of Generation X (1965-1980), and 42% of baby boomers (1955-1964 in this survey) said they felt the same.  

Average Monthly Contributions

There was also a generational difference when it came to arriving at that average $1.02 million amount respondents felt they needed to retire comfortably. The Gen Zers thought just $978,968 would be sufficient, while millennials said it was $1,069,874, and Gen Xers said $1,230,323 ought to do the trick.

Even though Gen Xers cited the largest amount needed in order to retire, they reported contributing $343 to their retirement fund each month—a tick less than millennials, who said they ponied up $344 a month. Gen Z respondents said they chipped in a monthly $306, bringing the average monthly contribution to $352 for all generations. 

Working to Get There 

So, in what ways are Americans working to reach their retirement goals? According to the survey, more respondents reported investing in stocks (47%) and bonds (37%) than any other method for growing their savings. Other popular strategies were renting out houses (31%), running a small business (26%), reselling things online (20%), and working part-time (19%).

However, those closest to retiring employed some other additional strategies. The No. 1 tactic among 46% of these respondents was putting together a spending plan. Other approaches of those nearing retirement included: 

  • Saving 10 times what they earned before they retired (42%)
  • Making it their top priority to pay off debt (39%)
  • Anticipating and accounting for adverse circumstances like inflation or negative investment returns (38%)
  • Knowing the current catch-up limits for 401(k) plan contributions for those age 50 and over (37%)
  • Coming up with a plan to claim Social Security benefits (37%)

The Million-Dollar Question

To find out how long $1 million might last for someone who retired in July 2022, Western & Southern came up with a state-by-state and overall ranking based on where the retiree lives. This ranking system took into account how much the typical American spends on essential things like their rent or mortgage, utilities, gasoline, and food. But health care expenses were not figured in, and neither were the retirees’ age, their number of dependents, or any extra sources of income they may have. 

Nationwide, the study found that it would take 24.5 years on average, or 294 months, for a 2022 retiree to spend their saved $1 million, considering only those basic monthly expenses. However, the money could last a lot longer—or be gone in a lot less time—depending on the state where the retiree lives.

For example, Western & Southern said the money would last 30 years or more in these states, which are relatively sparsely populated:     

  • Wyoming (33.5 years)
  • South Dakota (33.5)
  • West Virginia (32.8)
  • Arkansas (31.2)
  • Iowa (30.6)

But these states would exhaust that $1 million much faster:

  • Hawaii (13.6 years)
  • California (15.2)
  • Massachusetts (18.6)
  • Colorado (19.3)
  • Nevada (20.6) 

Rosier Retirements Ahead?

Retirement funding is a concern for many Americans today, especially in this time of high inflation. Few are confident they’ll have the amount they think they’ll need to live comfortably after leaving work. Fortunately, the youngest adults are the most optimistic about how likely they are to be able to save enough for retirement, and overall, people are socking away more than $300 a month toward theirs. That could portend rosier days ahead for retirees.   

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