A $1 million nest egg at the 4% withdrawal rule yields just $40,000 annually, which is barely half of what the average household spends each year at $78,535.
Rising inflation and healthcare costs make $40,000 buy noticeably less each year, with annualized healthcare spending alone jumping $204 billion year over year.
Average Baby Boomer 401(k) balances sit at just $267,900, far below the $1.26 million to $1.6 million that workers say they actually need to retire comfortably.
Are you ahead, or behind on retirement? SmartAsset's free tool can match you with a financial advisor in minutes to help you answer that today. Each advisor has been carefully vetted, and must act in your best interests. Don't waste another minute; learn more here.
The $1 million retirement target has been the round-number benchmark for a generation of savers. Run that balance through the classic 4% safe withdrawal rule, and it produces $40,000 in first-year income. On paper, that sounds workable. Measured against what the average American household actually spends, and against inflation that has not let up, the gap between the headline number and lived purchasing power is wider than most savers ****** ume.