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How Much Do You Need to Retire? And Why the Number Is So High

Sarah Sharkey Updated: August 27, 2023 • 4 min read

A recent survey by Charles Schwab of 401(k) participants found that workers believe they need at least $1.8 million to comfortably retire. It’s not surprising that Americans feel they need to have more saved for retirement. But the $1.8 million dollar mark might seem a bit high. 

Let’s explore why the cost of retirement feels so high, what factors are contributing to rising retirement costs, and how you can prepare. 

Workers estimate higher retirement costs this year

When Charles Schwab conducted the same study in 2022, participants estimated they would need an average of $1.7 million to retire. Just a year later, participants estimated they would need $100,000 more to retire comfortably. 

Obstacles facing future retirees

Everyone wants to retire someday, or at least have the option to walk away from paid work. While reaching your retirement savings goals is certainly possible, it’s true that there are many obstacles facing savers. 

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Here’s a look at some of the most commonly cited obstacles to saving for a comfortable retirement:

  • Inflation: If you’ve been paying attention to the cost of things, you’ve likely noticed that life has gotten more expensive lately. With costs rising across the board, it’s not surprising that 62% of savers cite this as a reason why saving for retirement is a challenge. 
  • Stock market volatility: The stock market has seen some extreme swings over the last 24 months. With many factors at play, it’s likely the stock market will continue to exhibit extreme volatility. It’s for many to put their trust in the stock market while saving for retirement. 
  • Keeping up with monthly expenses: Rising costs down just impact how much you’ll need to have saved for retirement, it also makes it more difficult to save for the future. As the cost of essentials rises, many savers struggle to sock away funds for the future. 
  • Unexpected expenses: When an unexpected expense strikes, it can derail savings plans. 
  • Paying off credit card debt: Credit cards have notoriously high interest rates attached, which makes paying them off a top priority. Households with a big credit card balance might not have too much room to contribute towards savings. 
  • Paying for children’s education: Many parents want to help their children pay for college. But rising college costs can make it challenging to cover this significant expense and save for retirement. 

As the cost of essentials rises, many savers struggle to sock away funds for the future. 

How to make headway toward retirement savings goals

While the average worker estimated they would need $1.8 million to retire comfortably, only 37% feel that it is very likely they’ll hit that goal. 49% of the group thinks it’s only somewhat likely they’ll hit their goal. And another 14% think it’s not at all likely they’ll hit this lofty mark. 

If you are concerned you aren’t on the right track to hit your retirement savings goals, here are some ways to change your situation:

  • Explore employer retirement opportunities: Some employers offer pensions or 401(k) matches to help you save for retirement. Find out what your employer offers. If your employer is offering a 401(k) match, do your best to meet this percentage. 
  • Understand what you need: Based on the survey, participants say they’ll need an average of $1.8 million for a comfortable retirement. But everyone’s needs are different. Take the time to add up how much you’ll realistically need for the retirement you want. 
  • Automate your contributions: Once you decide how much you’ll need to save, automating your contributions can help you stay on track. 
  • Never touch your retirement savings: It’s possible to pull funds out of your retirement accounts early. Unfortunately, this can set you back on your goals. If possible, avoid touching your retirement savings until you reach retirement. 
  • Choose the right approach: For most, saving for retirement includes opening an investment account to invest in the stock market. But supplemental ways to save include real estate assets, bonds, CDs, and high-yield savings accounts. 
  • Pick up extra income: Extra income through extra hours or side hustle can dramatically transform your ability to save. If you don’t have room in your current budget to save, look for ways to grow your income. 

The bottom line

As you save for retirement in an undeniably turbulent economy, it can be tricky to make room in your budget for the future. But with rising retirement costs, setting aside money for your golden years is more important than ever. 

If you are ready to build your savings, consider opening a high-yield savings account today. 

Written by Sarah Sharkey linkedin-icon

Sarah Sharkey is a personal finance writer with a Master's in Management from the Hough School of Business at the University of Florida. She enjoys helping people make better financial decisions and has written for numerous personal finance publications, including Money Under 30, Business Insider, and The College Investor. Sarah enjoys traveling, hiking, and reading when she is not writing.