I used to think I’d be happy with $1 million in retirement savings. This is why I doubled my number

When I started saving for retirement in my 20s, I would roll my eyes every time I looked at my paycheck and saw a deduction for my 401(k) contributions. At the time, it was hard to appreciate my efforts, knowing how far away retirement was.

Now, several decades later, I am extremely grateful that I pushed myself to start contributing to a retirement account at a fairly young age. There was a time when I thought a million dollar nest egg would be more than enough to see me through the years, but I’ve since realized that a million dollars probably won’t get me – will reduce it.

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The $1 million problem

As of 2022, the average retirement account balance among Americans ages 65 to 74 was about $609,000, according to the Federal Reserve. Since the stock market has done well since then, it’s fair to assume that if the Fed were to update that number today, it would be higher. However, it probably wouldn’t be $1 million.

With that in mind, you’d think I’d be happy with a million dollar nest egg. But I worry that it won’t be enough for a few key reasons.

First, if I use the 4% rule to manage my retirement savings (which I’m not sure I will, but that’s a different story), a $1 million balance results in about $40,000 per year. I’m not afraid to admit that I’m used to living much longer. And while it’s common to take a pay cut in retirement, there’s a limit to how big of a pay cut I want.

Second, I expect Social Security to pay me a monthly retirement benefit. But because the program faces potential cuts, it’s hard for me to determine how much revenue I’ll get from it. And I have to prepare for the fact that my monthly benefit can be reduced for reasons beyond my control.

There’s also healthcare to consider. Fidelity expects the average 65-year-old to spend $157,500 on health care in retirement starting in 2023. But because the cost of health care has risen so quickly, that number could easily double by then in which my retirement falls. If so, and I’m retiring with $1 million, I’m looking at spending about a third of my savings on healthcare, and that’s not even including long-term care.

Finally, the last few years have shown me that inflation is a difficult beast to reckon with. The levels of inflation we’ve seen since 2021 are unusual, but no one can rule out another prolonged period in which the cost of living rises rapidly. I want more savings so I’m equipped to handle something like this at a time when I might not be working.

I’m doubling my savings goal — but whether I’ll get there is up in the air

Clearly, I have some concerns about retiring on just $1 million. But another reason I aim higher is that I don’t want money to be something that holds me back at that stage in life.

I want the flexibility to live wherever I want and spend my time however I want. And I’m willing to make sacrifices now to give myself those options.

As such, I strive to work towards a $2 million retirement. Will I get there? I don’t know.

A lot will depend on factors that include which investments I decide to stick with and how the stock market performs. It will also depend on my income and the extent to which artificial intelligence (AI) derails my career (something that is a big fear of mine, if I’m honest). The less I manage to earn, the less I can save.

You might read that if you retire with $1 million, you’re set for life. And a million dollar nest egg is something to be proud of. But before you decide that’s the number you’re aiming for, think about whether it will really work for you. You may decide that it’s best to aim higher.