That nice round sum of $1 million has long been seen as the magic number for retirement saving. It's a goal that's easy to focus on, and big enough to guarantee anyone a comfortable retirement. Right?
Well, maybe not. Then again, maybe you could get by with far less. So how much do need to save for retirement? Let's take a look.
The problem with $1 million
That $1 million benchmark came from a different era, when life expectancies were shorter and pensions were still a thing. Are there employers who even offer pensions anymore?
Plus, $1 million isn't what it used to be, and it will be worth even less for tomorrow's retirees.
Mark Avallone, president of Potomac Wealth Advisors and author of Countdown to Financial Freedom, told CNBC a 67-year-old could retire today with $1 million and enjoy a $40,000 annual income by withdrawing 4% a year.
But a 42-year-old aiming for $1 million by age 67 can count on just $19,000 a year in retirement, after inflation is factored in. A 32-year-old millennial who wants to retire at 67 with $1 million would live below the poverty level.
The 4% rule
So if the save-a-million advice no longer cuts it, how about other longstanding bits of retirement saving advice?
We've already touched on the 4% rule — the idea that you need to have enough money set aside so you could live on 4% withdrawals each year.
Inflation makes this a complicated equation, plus it's based on the notion that retirement savings should sustain you for at least 30 years. That's no good if you:
Want to retire early.
Plan to keep working into your 70s.
Think a long life is unrealistic for you.
And not to be a buzzkill or anything, but the average U.S. life expectancy is 78.7 years.
It's worth noting that the creator of the 4% rule, a financial adviser named William Bengen, bumped up his recommendation to 4.5% in 2006 and recently suggested that 5% might be safe based on the current level of inflation.
An extra 1% might not seem like much, but it could shave hundreds of thousands off the amount you'll need to save to live comfortably during your retirement.
The 'multiply by 25' rule
There's also something called the multiply by 25 rule, which is sort of the flip side of the 4% rule. You think about how much annual income you'd like to have in retirement, then multiply it by 25. That's how much you should save.
So if you'd want to live on $60,000 a year in retirement, you'd need to have $1.5 million socked away. If you might get by on $35,000 a year, you'd have to save $875,000.
A big flaw with both this rule and the 4% rule is that they don't take into account your other sources of retirement money, like Social Security.
Plus, they ignore how pretty darn hard it is for a younger person to know how much monthly income will be enough to survive on decades from now.
The struggle to save
Maybe it's no wonder that one survey found that while the overwhelming majority of millennials are saving, 40% still picked money as their biggest source of stress.
Also, only about a third (35%) of millennials said they're saving beyond employer retirement plans, like 401(k)s.
It'll take more than that to reach $1 million or more, if that's the goal. But most of us are a long way off.
A 2016 study from the Economic Policy Institute found the average U.S. household had less than $96,000 in retirement savings. Families close to retirement — in their late 50s and early 60s — had about $164,000 put away.
And that's the average. Half of American households 55 and older have no retirement savings, according to the Government Accountability Office](https://www.gao.gov/assets/680/670153.pdf). Nothing. Zero. Nada.
Answering the big question
So maybe this is the best answer to the "How much should I save for retirement?" question: SAVE SOMETHING.
Save whatever you can, invest the money so it will grow, and don't allow yourself to wind up with a goose egg instead of a nest egg.
You have plenty of free or low-cost resources to get you going, including a popular, low-cost stock trading app that charges no commissions and lets you buy fractions of shares with as little as $1.
Or, use another app that rounds up your purchases to the nearest dollar and puts the change into an investment account. You'll be amazed by how fast it can grow.
One more way to go is by opening an account with an automated investing service, or robo-advisor. These services automatically adjust your portfolio to protect your money when markets turn turbulent.
There's no good, standard savings goal everyone should shoot for, so don't worry about whether $1 million or $2 million will be enough.
And don't do anything crazy either.
In the survey we mentioned earlier, 26% of millennials said they were so eager to retire by age 50 that they would give up sex for a year. And, 40% said they'd stay off social media for a year.
(Sex, maybe — but you think you could stop looking at social media?)