Is $2 million the new $1 million for retirement savings?

How to Avoid Going Broke in Retirement

Conventional wisdom has long held that $1 million in savings would buy you a comfortable retirement. "If you have $1 million, you're going to be ok," is the mindset of many retirees, says David Weliver, founder of the finance website Money Under 30. However, times are changing, and so too is that conventional wisdom.

Finance experts like Weliver now say using a $1 million rule of thumb could leave young adults short of cash in their retirement years. Others argue no single number could possibly apply to all retirees and a more customized approach to savings goals is needed.

[See: 10 Painless Ways to Save More for Retirement.]

The case for the $2 million retirement fund. Weliver advocates for millennials having a $2 million nest egg for retirement. "Some people will think that's really high," Weliver says, but it needs to be to prepare for the possibility of inflation. At retirement, $2 million could give someone $80,000 a year to live on, but depending on inflation, that money might only have the spending power of $30,000 in today's dollars, according to Weliver's calculations.

While people may believe their expenses will decrease in retirement and make it possible to live on less money, Weliver isn't so sure. "You'll presumably have time on your hands to pursue new interests," he says. Travel, hobbies and vacation homes all come with price tags that make having $2 million in the bank all the more important.

Alex Matjanec, cofounder of, agrees that $2 million seems like an accurate goal for young savers, especially if they work for start-ups or small businesses. "Millennials and many others aren't working in companies with 401(k) matches," Matjanec says. That means it's up to workers to put more of their own money aside to pay for retirement expenses.

[Quiz: Are You on Track to Max Out Your 401(k)?]

A different rule of thumb. However, not everyone is convinced all savers need to have $2 million in the bank at retirement. "A dollar amount isn't the way we're going these days," says Meghan Murphy, a director with Fidelity Investments. "If you make $100,000 [a year], then $2 million might not be enough."

Instead, Murphy suggests savers try to hit certain benchmarks based upon their age. For instance, Fidelity recommends people have an amount equal to one year's income in their retirement fund by age 30. By 35, that amount should be equal to double a person's annual income. Ultimately, by age 67, a retiree should have ten times their income in a retirement account.

Bob Gavlak, a certified financial planner and wealth advisor for Strategic Wealth Partners in Columbus, Ohio, is also skeptical of the $2 million figure. "It's way too broad of a number," he says. "It's too round and too perfect." Millennials should strive to put 10 percent of their income away in retirement savings and 15 to 20 percent would be even better, Gavlak says. Those numbers sound good to Matjanec, too. "The sweet spot of 15 percent is ideal," he says.

It's not as bad as it might seem. Regardless of whether the number is $2 million or 15 percent of your income, the amount needed for retirement can seem insurmountable to some people. Indeed, much has been written about the idea that workers will never be able to save enough to live comfortably in their senior years. However, the situation may not be as dire as it seems.

[See: 10 Ways to Get Help Saving for Retirement.]

Younger workers have the same safety net as previous generations. "Twenty-five years ago, everyone had a pension," Gavlak says. "Today, no one has a pension, but everyone has Social Security."

Copyright 2015 U.S. News & World Report

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