Do we really need $1M in retirement savings? Not even close, one top economist says

For years, the conventional wisdom has been that individuals need to save at least $1 million in order to enjoy a comfortable retirement. However, according to a top economist, this figure is grossly exaggerated and may be doing more harm than good.

Laurence Kotlikoff, a renowned economist and professor at Boston University, argues that the $1 million target is not only unrealistic but also misleading. In an interview, Kotlikoff stated that the notion that retirees need $1 million in savings is a “myth” that has been perpetuated by the financial industry.

Kotlikoff’s argument is based on the fact that retirement savings needs vary greatly depending on individual circumstances, such as lifestyle, location, and healthcare costs. He suggests that a more realistic approach would be to focus on replacing a certain percentage of one’s pre-retirement income, rather than aiming for a specific dollar amount.

In fact, Kotlikoff’s research suggests that many retirees can live comfortably on significantly less than $1 million. He cites examples of individuals who have saved as little as $200,000 to $300,000 and are still able to maintain a decent standard of living in retirement.

So, why has the $1 million figure become so deeply ingrained in our collective psyche? Kotlikoff believes that the financial industry has played a significant role in perpetuating this myth, as it encourages people to save more and invest more in financial products. However, this approach can lead to unnecessary stress and anxiety for individuals who may not need to save as much as they think.

In conclusion, while saving for retirement is undoubtedly important, the notion that we need $1 million to enjoy a comfortable retirement is not supported by evidence. By focusing on replacing a certain percentage of our pre-retirement income and considering our individual circumstances, we can create a more realistic and achievable retirement savings plan. As Kotlikoff so aptly puts it, “the goal should be to have enough, not to have a million.