Do You Need $1 Million for a Comfortable Retirement? Here's the Truth.

If you're aiming to save $1 million by the time you retire, you're probably in good company. A lot of people tend to fixate on that specific number because, well, it sounds pretty darn great. To be fair, it is a lot of money, which means that if you hit that goal, you could end up in a great position to enjoy retirement to the fullest.

That doesn't mean your senior years are doomed if your retirement account balance never hits $1 million. You may be able to get by on much less, depending on what your needs look like.

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It's a matter of your personal spending

While a $1 million nest egg might seem like it would buy you your dream retirement, it's important to realize that many seniors today get by on much less. Fidelity, for example, puts the average 401(k) balance at $258,800 for people ages 65 to 69.

If you enter retirement with a paid-off home and vehicle, and you plan to spend your time doing household projects, gardening, socializing locally, and bonding with your grandchildren, then you may not need a $1 million IRA or 401(k) to afford your lifestyle.

Plus, you may end up relocating to a more affordable part of the country once you're no longer tethered to a job. If you have a lot of home equity to cash in, you could end up using that money to supplement your savings.

Also, don't forget about Social Security. Even if you only qualify for the average monthly benefit today, that should still put about $25,000 a year in your pocket, which reduces the amount you have to save.

Don't fixate on a specific number

It's easy to get caught up in aiming for a $1 million nest egg. But rather than doing that, a smarter way to go about things is to think about what you want retirement to look like and calculate your personal spending needs.

Let's say you're aiming to live in an area with low taxes (property and income), you're not carrying debt into retirement, and you want to fill your days with local activities. A $50,000 annual budget may more than suffice.

If you're able to get $25,000 of that from Social Security, you only need your savings to match that amount. Using the 4% rule, a $625,000 nest egg should allow you to comfortably withdraw $25,000 annually.

Of course, this doesn't mean you shouldn't try for $1 million in savings if you like the sound of that. The point, rather, is to not get hung up on that number to the point where you sacrifice too much today to save more than what you actually need.

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