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Do you really need $1 million to retire?

A Federal Reserve study found that most retirees have saved a lot less

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By:
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Mark Huffman
Reporter

Mark Huffman has covered consumer issues since 2004, with a special focus on protecting and empowering older adults. A former news correspondent for the Associated Press Radio Network, Westwood One, and ConsumerAffairs, Mark brings decades of journalistic experience to RetirementLiving.com. He is passionate about giving consumers a voice and helping them make informed decisions. Mark has also created educational content, including Senior Scam Alert, a video resource designed to help seniors recognize and avoid fraud. He holds a B.A. from the University of Kentucky and lives with his family in Richmond, Virginia.

Updated:

key insights:

  • Massive racial disparities persist in wealth, with the typical White family’s wealth over six times that of a Black family and five times that of a Hispanic family.
  • Non-White families gained ground in asset ownership, including increases in home, stock, and business ownership among Black and Hispanic families contributed to their rising wealth.
  • Economic anxiety is widespread, with non-White families significantly more likely to report unusually low income and uncertainty about future earnings.

Many retired Americans worry that they will run out of money during retirement, thinking they haven’t saved enough. Some haven’t, but others may be overestimating what they need.

For example, an often given answer to the question, “How much money do you need before you retire?” is $1 million. But not many people have that much value in their portfolios.

A recent report by the Federal Reserve found that fewer than 5% of retirees have at least $1 million in the bank. Fewer than 2% have retirement savings of $2 million.

In fact, households headed by someone between the ages of 65 and 74 have average savings of just a little more than $600,000. However, the median savings is only $200,000. The median savings for Americans over 75 drops to $130,000.

Racial breakdown

But there are wide variations in savings among different racial groups. The typical White family held $285,000 in wealth in 2022, far outpacing their Black ($44,900) and Hispanic ($61,600) counterparts. 

Asian families, surveyed independently for the first time, led all groups with a median wealth of $536,000. Though Black and Hispanic families made significant relative gains—boosting their median wealth by 61% and 47% respectively since 2019—White families also saw a 31% increase, further widening the absolute dollar-value gap in wealth.

In concrete terms, the wealth gap between the typical White and Black family expanded by more than $50,000 between 2019 and 2022, now exceeding $220,000. The same pattern held for White-Hispanic wealth differences.

Tied up in real estate

Not all retirement wealth is liquid. Much of the recent wealth growth among non-White families came from surging home prices and improved ownership rates. Homeownership rose among Black and Hispanic families, helping drive increases in net housing wealth. Business ownership also climbed sharply among these groups, reflecting a wave of new business formation.

However, despite increased access to wealth-building assets, the value of these assets remained relatively modest for non-White households. Many newly acquired businesses and stocks were small in scale, limiting their contribution to long-term security, the study found.

Retirees and those approaching retirement who have financial concerns may benefit from talking to a professional retirement planner. Here’s a good place to start.