Experts Advise Focusing On Savings Rate Rather Than Retirement ‘Magic Number’

A new study has shown that Americans believe they need nearly $1.5 million to retire comfortably, but financial experts argue that focusing on a specific “magic number” may not be the best approach to retirement planning. Instead, they emphasize the importance of maintaining a high savings rate and appropriate asset allocation.

The study from Northwestern Mutual showed that Americans believe they need to save $1.46 million to guarantee a comfortable retirement. This number is an all-time high, representing a shocking 53% increase since 2020, when the “magic number” was just $951,000.

Meanwhile, financial experts are claiming that Americans shouldn’t be focusing on the so-called “magic number,” and should instead use it as a “starting point” to begin a conversation about important financial decisions.

“The number isn’t the emphasis,” said John Roland, a certified financial planner and private wealth advisor at Northwestern Mutual’s Beyond Financial Advisors. “That retirement number is really just a starting point for a broader conversation on how to make clear, competent decisions in that phase of your financial life.”

Fidelity Investments, the nation’s largest provider of 401(k) savings plans, has moved away from providing broad estimates for retirement savings goals. Rita Assaf, vice president of retirement products at Fidelity, stated, “There is no one size fits all. It really depends on your personal situation.”

Financial advisors stress that a high savings rate, coupled with appropriate asset allocation, is one of the most significant components of building wealth. Fidelity provides a framework for evaluating retirement savings progress based on age, recommending saving one’s annual salary by age 30 and gradually increasing the multiple over time.