How much money do you need for a comfortable retirement? Americans have agreed on a number. According to Northwestern Mutual’s Planning & Progress Study for 2025, the magic number is $1.26 million.

This is actually down $200,000 from the $1.46 million that Americans thought they’d need for their senior years in 2024. It’s also on par with the numbers that people projected in both 2022 and 2023.

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So, are Americans right? Will $1.26 million be enough for a secure future?

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How much income would a $1.26 million retirement nest egg produce?

A nest egg of $1.26 million may sound like a lot of money, but when deciding whether it’s enough for retirement, there are two big things that you need to consider:

• How will inflation affect the buying power of your savings?
• How much income will it produce when you’re trying to make the money last for 30 or more years of retirement?

When you consider these two issues, it becomes clear that even a seven-figure investment account of this size may not be quite enough to give you the security that you had hoped for.

Of course, if you are retiring this year or within the next few years, then $1.26 million is going to be worth pretty much what you expect it to be, because you don’t have many years of inflation to eat away at its value. However, if you are not retiring for another 20 years, your $1.26 million would only have the buying power of $848,000 in today’s dollars, assuming a 2% average annual inflation rate. To actually have $1.26 million worth of buying power in two decades, you’d need $1.87 million saved.

The second issue is how much income $1.26 million will provide. You can’t take too much money out of your account too quickly. Otherwise, you’ll reduce your balance so much that you no longer earn enough returns to keep your account going. You could see your balance dwindle to $0 if you aren’t careful. Experts now suggest a 3.7% withdrawal rate to maximize the chances your money will last. This is down from 4%, which you’ve probably heard referred to as the 4% rule.

If you follow the 3.7% recommendation, this would mean $1.26 million would give you $46,620 annually to supplement Social Security.Whether that’s enough or not is going to depend on what you were earning and the lifestyle you want to live as a retiree.

What should your retirement savings target be?

While the typical American may think they’ll need $1.26 million saved, as you can see, this may or may not be enough for you, depending on factors like when you are retiring and how much you want to spend. You’ll want to create a personalized estimate for how much income you’re going to need as a retiree to ensure you don’t fall short. To do that, you can follow rules of thumb like assuming you’ll need around 10 times your final salary.

Once you have an idea of the income you’ll need, make sure you are on track to building your desired nest egg by setting up automated contributions to tax-advantaged accounts. You’ll need money to supplement Social Security. Make sure you figure out how much and set yourself on the path to saving it, so you can have the future financial security you deserve.

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