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  • Writer's pictureBridget Sullivan Mermel CFP(R) CPA

How Much Do You Really Need for Retirement? Survey Says $1.46 Million

In this episode of Friends Talk Financial Planning, Bridget Sullivan Mermel and John Scherer discuss a recent survey by Northwestern Mutual that claims Americans think they need $1.46 million to retire. Bridget and John argue that people might be thinking about this all wrong. Instead of focusing on a specific savings number, the key question should be: How much do you want to spend in retirement? Tune in as they break down the survey results, discuss the anxiety around retirement savings, and explore practical financial planning strategies.

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Bridget: Hey, John, our friends at Northwestern Mutual put out a survey that says the Americans think they need $1.46 million to retire. I disagree, and I think they're thinking about this all wrong. On today's episode of Friends Talk Financial Planning, we're gonna dig in. Hi, I'm Bridget Sullivan Mermel, and I've got a fee-only financial planning practice in Chicago, Illinois.

John: And I'm John Scherer. I've got a fee-only financial planning practice in Middleton, Wisconsin. And before we dig into why we think Northwestern's survey gives us some bad data, I want to remind all our viewers to hit that subscribe button. It helps other people find our content on YouTube. We're trying to get 1,000 subscribers, so click subscribe, then let's dig into this, Bridget. I'm really looking forward to this conversation. I love the specificity of the introduction: $1.46 million. Once we get there, then we're all done, right? This article just came out recently as we're recording this, and when I saw the numbers, I had some strong thoughts. I know you did, too. And tell me, what was your reaction when you saw that survey? What are you thinking?

Bridget: It's just kind of one of those things that is bass ackward. I don't know what the old saying is, but this article is thinking about retirement in the wrong way. And I just think about the whole question quite differently than the way that it was presented by Northwestern Mutual, but also the way people think about it. So I'm going to just be clear that, first of all, I think the important question isn't how much money do you need, it's how much do you want to spend when you retire, because that's actually the main driver in how much money you need. It's all about spending, it's not about a set number. And I'm not saying you have to spend less, I'm just saying that that's the actual important variable, not how much do you have in your pot?

John: Yeah. That was exactly my reaction to it as well. I think this stuff is really interesting. And one of the things I took from looking at the summary of the study that they published was that it had to do with what people’s feelings were, how they thought about things, not necessarily is that the right number? But that's where their emotions are, and their behavior leads. I thought it was interesting that they've been doing the study. I haven't been in tune with it over the years, but four years ago, I think it was in 2020, from then until now, that number has gone up something like 50%.

It was something in the $900,000 range and now it's like a million and a half, so something significant. And that's where I think, “Has the real number for people changed that much for when they can retire?” Maybe it has changed, but I don't think 50%. Clearly how they feel about this has changed. I'm not sure exactly what to make of it, but I thought that was an interesting point in looking at that study.

Bridget: Yeah. Because people think they need $1.46 million, but they actually have $88,000.

John: Right.

Bridget: So that is a big gulf. And I just think it reveals that people generally have a lot of anxiety about this gulf. So they broke it down, interestingly, into generations. And so, they said boomers (I'm not sure exactly how they define boomers) think they need $990,000, and they actually have $120,000. Again, even though the numbers might be a little bit more informed and aren't as extreme, they still show this large anxiety. And this group is probably more informed about what they really need. So I just want to talk about a couple examples of people who might need a large amount in their retirement plan and then people who really don't need anywhere near $1.46 million.

So one person I talked to recently had a spouse who passed away 10 or 15 years ago, and they're the beneficiary of a pension. And the pension is decent, covers their spending, and was from a private company. And so, on top of the pension, they also get Social Security. But they're not really even spending their Social Security. So this is probably an exaggeration, but I think an argument could be made that how much this person needs is zero.

John: Right.

Bridget: They’re covered. And Social Security, people forget, is indexed for inflation. It’s not a perfect index, and they argue about what index to use, and some people don’t like the index because they think it gives people too much, but it is indexed for inflation and so that source of income is going to be going up. And people don't realize that a big part of your spending increase could be covered by the Social Security increase.

John: Yeah, I love that example. And to me, it circles back to what you said before. It's about how much you spend. If that person was spending twice the amount, perhaps, well, then they would need some money. So it all circles back to this idea. I'm sure that they do some really in-depth analysis, because they're pros at doing these surveys; they ask good questions. But there's a lot of things that are unanswered. One of them is how much do you need for retirement? Is that my spouse and I? Is that me individually or my household? Are you wrapping Social Security into it or pensions and things?

They probably answered it in some other places, but it wasn't clear in the things that I saw about it. And the point is not to question the results, but just to ask, “What's the concept?” I don't think that the exact number, $1.46 million, is the right thing, but what is this saying? And to your point about the spending side of things, I think the most important thing for people to figure out is not how much money they need to have saved up for retirement but how much are they spending and how much do they think they'll be spending in retirement. And then calculating that amount that they need to save up becomes sort of like a middle school math equation.

Bridget: That's the question you start with.

John: Right.

Bridget: And how much do you spend is actually a grade school question. That's the math level needed for that. And so, you had a great story about some people that you knew who had a big gap. Tell us about that.

John: Yeah. It sounds so simple. And so many of the things we talk about on our show and do in our professional life are not super complicated, but it also is not easy. Well, how much do you spend? We got to start with that. Well, geez, how hard can that be to figure out? Well guess what? It's a lot harder than you might think it is. If you just ask people, well, how much do you spend, I bet you get a wide variety of numbers, maybe even between spouses. And you're right, we had somebody who came in, and we talked about how much you spend, then we'll sort of figure out how much you need.

And I was just talking with the husband in this case. He said, “Well, geez, I think I kind of did the math, and $4,000 to $5,000 a month. I can't imagine we'd spend $6,000 month, so why don't you start with $5,000, and we'll kind of work together.” I said, “Great.” I gave him some homework. We've got some processes that we use to help figure out. I think it's really hard to figure out what you’re going to spend, but it's relatively straightforward to figure out what you have spent. So I gave him this assignment, saying, “Hey, track what you have spent, then we'll talk about it here.”

And so, we'd put together some projections at $5,000 a month and said, “Hey, retirement looks in pretty good shape for you in a few years here.” Well, they came back, and they said, “We put together our actual spending numbers, and it was $9,500 a month.” He said, “I had no idea we were spending this much.” There's no concept for how to connect those dots. And this is an intelligent person. It's not that easy to know what you spend as long as there's enough. Maybe if you don't have enough, then you’re really counting the pennies every month, but if you have enough, it’s easy not to think about it.

Bridget: I think of it as a luxury to not know how much I spend. That's a luxury that I like.

John: Yeah, exactly. I just don't worry about it.

Bridget: But when you're coming to retirement, that's the question. How much do I want to spend? That's the most important question. And I'm not saying spend less. That's a misunderstanding about this. When I'm saying that how much you spend is the most important thing, people often think, “Well, you just want me to spend less.” No, I totally don't care about how much you spend, but I just want to know what it is, so I can run the numbers.

John: Right. And it reminds me of people who get to retirement and say, “I got to get on a budget.” And I say, “If you want to, that's great, but I think what you need to know is, how much are you spending? And how do you feel about that? Do you feel good about those things?” In this person's case, they said, “Holy mackerel, the kids are out of the house, and we've been going out to eat a lot. We need to cut down on that dining out budget. We could save $1,000 a month by just not going out to eat five nights a week.” Okay, cool.

Bridget: Especially if the goal is I want to retire sooner.

John: Right. On the other side, they could have said, “Hey, going out to eat is really valuable to us. We're not going to cut that…

Bridget: …That’s our luxury. We love it. That's where we connect. We get together as friends. It's a wonderful experience.”

John: Exactly. It's not right or wrong, like you said. It’s not like we're saying, “Hey, you need to spend less.” And again, it goes back to that sort of middle school math equation. You've got expenses on one side, and you've got cash flow on the other, and they've got a balance out, and you can either raise one or lower the other. And there’s not one answer to it. You've just got to make those things balance out.

And as you said, we can think about cutting back, the self-depriving sort of thing, or we could look at the other side; work a little bit longer, make a little bit more money. There're other answers to it, but number one is you really need to know what that number is. And I really appreciate this study. What are people feeling like? How is that going? And I'd be interested know, what do you need to spend in retirement? How much are you spending right now? How many people know that without doing math?

Bridget: Right.

John: And maybe it’s a man off the street sort of thing, asking, “Hey, how much do you spend per month?” All right, what's that number? Now to do this or that exercise, go back in and break it down. What's the real number, and how does that compare? I think that'd be a really interesting and a more valuable method for predicting what we need to get to for retirement.

Bridget: Yeah. And if you really don't want to look at this, one exercise (a scary one) that Burt used to recommend is look at your federal tax return. Look at what your income ends up, look at how much you're paying in taxes, then add your state taxes on that and think about what you saved. That would be a ten-minute estimate, but it's scary, so people don't want to do it.

John: Right. But having that awareness.

Bridget: Yeah. I had this one client who said, “We don't spend that much. We don't spend that much. We don't possibly spend $300,000 a year.” I said, “Let's look at your tax return. Well, this says you're spending $300,000 a year.” And the client said, “Well, that includes what we pay for college for our kids.” And I replied, “That's spending. It's coming out of your income.” I think that sometimes people can have delusions. But it's a good example of how things are not necessarily going to keep going when you're in retirement. If you're spending money out of pocket for college, that should be over in retirement.

John: Right. This focus on spending is totally what we do in our practices. It seems like we could do a whole episode on this topic, and we could talk about some of the strategies and tools. And for viewers, if you're interested, let us know if that sounds useful. We'd love to do a whole episode on tools and techniques that you can use to take control of this.

Bridget: And it would motivate me to track it more.

John: Yeah. Right. Or be scared.

Bridget: I've been working with one program, but I want to try another one, so it could motivate me to do it.

John: Excellent. Let's wrap things up here. I'm John Scherer. I run a fee-only financial planning practice in Middleton, Wisconsin.

Bridget: I'm Bridget Sullivan Mermel. I've got a fee-only financial planning practice in Chicago, Illinois. And if you're looking for an advisor in your area, we're both members of ACP, which is the Alliance of Comprehensive Planners. And you can find out more about them at And please subscribe.


At Sullivan Mermel, Inc., we are fee-only financial planners located in Chicago, Illinois serving clients in Chicago and throughout the nation. We meet both in-person in our Chicago office and virtually through video conferencing and secure file transfer.

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