You’ve probably come across those big retirement numbers that show up in media or surveys. Most of them sound a lot higher than what many people can actually save. Here are some popular ones:
- $1.8 million — Schwab 401(k) Participant Study (2024)
This one shows up a lot. According to Schwab’s annual study, most 401(k) participants believe they’ll need around $1.8 million to retire comfortably. That number has crept up over time. It was $1.7 million back in 2022. It’s become the most quoted figure, even though very few people actually get close to it. - $1.46 million — Northwestern Mutual Planning & Progress Survey (2024)
This one came out the same year but from a different group. Northwestern Mutual’s 2024 survey said the average “magic number” people expect to need in retirement is $1.46 million. It’s a bit lower than Schwab’s, but still far beyond what most people are realistically working with. - $1.26 million — Northwestern Mutual Planning & Progress Survey (2025)
In the following year’s survey, the number came down a bit. People started adjusting expectations. The 2025 version of the same survey showed the average dropped to $1.26 million. So even though the big number thinking is still there, it seems like there’s at least some recognition that those earlier expectations might have been too much.
In this article, we will walk you through to show how an American with median income needs far less than the above headline numbers to retire at a similar quality life before retirement.
A simple retirement spending formula is to utilize so called 4% wtihdrawal rule: the conventional wisdom goes that if you manage to withdraw 4% every year in a conservative investment portfolio (such as 70% in bonds and 30% in stocks), you probably will end up being able to extend your capital beyond 25 years: remember spending 4% every year in an account without much investment gain will deplete the account completely in 25 years (100%/4%=25). Financiall planners often use this 4% as a rule of thumb to gauge how much retirement income you need. Or put it another way, if you need to spend $10,000 a year, you would need to save $10,000 * 25 =$250,000 income before the retirement.
So here are some numbers we can play with a typical American of 65 year old with median income:
According to BLS data summarized by SmartAsset, full‑time workers aged 65+ earn a median of roughly $60,268 per year. Financial planners generally advise replacing 75%–85% of pre‑retirement income; Schwab specifically recommends about 80%. That puts your retirement income target at about $48,000 annually.
Meanwhile, the average newly retired worker collects about $2,000 per month in Social Security, or $24,000 per year, as of 2025. That equates to Social Security covering nearly half your income goal, leaving a gap of $24,000 per year. Under the 4% safe withdrawal rule, you’d need only $24,000 * 25 = $600,000 (as 100%/4%=25) in savings to generate that supplemental income. This is far less than the headline figures!
Why $600K Can Be Enough
That’s not to say larger balances are useless. But if you can invest $600K conservatively and consistently earn about 4% after inflation, that portfolio should support a stable $24,000 annual withdrawal. It could last decade, and you can still manage to leave something over at the end. This amount also reduces pressure to chase high‑risk strategies during market fluctuations. In comparison, obsessing over a $1.8 million goal may mislead you into delaying retirement unnecessarily or taking undue risks.
Why Realistic Targets Matter — Both Psychologically and Economically
Setting an overly ambitious savings target like $1.8 million can create anxiety, discouragement, or inaction. Many people in their 50s or 60s with $300K–$400K saved may feel they’ve already failed, even if they are on track for a comfortable retirement based on income replacement. That psychological burden can erode confidence and planning energy.
Economically, inflating your savings goal can steer you toward riskier investments or unnecessary financial austerity in your productive years. By contrast, a realistic target tied to your actual needs lets you invest steadily, spend reasonably now, and retire with clarity. It also makes you to focus on your investment portfolio risk, something you can manage with tools like MyPlanIQ’s Fixed‑Income and Tactical Portfolios, which aim for low‑volatility, inflation‑beating performance for retirement savings.
Individuals Vary
Of course, the above is just a ‘typical’ American. For all of us, we are anything but an exact typical. For people who have higher income, you can easily see that your retirement savings needed for a comfortable retirement life can double or even triple (for a person with $180,000 annual compensation before retirement, for example). Of course for such a person with $180,000 before retirement, she or he indeed might need 3*600,000 or $1.8m savings!
The point is, everyone should take time to run some numbers using the basic rule of thumb discussed in this article to understand their own situation. Headline figures are just headlines. They meant to grab your attention. But the real story is always in the details.