It turns out $1 million isn’t the magic number to save for retirement

Saving money for retirement is important, but so is paying off debt. So which should you prioritize?

How much money do you think you need to save for retirement?

According to a survey from Northwestern Mutual, many adults believe they must save about $1.27 million to retire cozily. Adults in their 50s expect to need $1.56 million saved, those in their 60s expect to need about $968,000 saved for retirement, while adults in their 70s believe they need to have around $936,000 saved.

The reality is more complicated than this, though.

“You don’t want to plan for the average life expectancy. You want to plan conservatively and plan for expenses through age 100,” Vanguard wealth advisor executive Matt Fleming told MarketWatch.

Fleming also said that adults should plan to save between 75% and 85% of their income before their retirement.

But many Americans stop very short of what they believe they need to save.

On average, adults in their 50s save $110,900, those in their 60s save $112,500, and adults in their 70s $113,900, according to the survey.

So then how do you go about saving for retirement when there is such a large discrepancy between what you think you need saved and what you may actually have saved?

“Look at potential sources of income — 401(k), IRAs, pensions, savings and Social Security — and additional income streams like rental properties, annuities or inheritance. It’s also important to check insurance policies,” according to GoBankingRates.

Northwestern Mutual certified financial planner and wealth management advisor Alap Patel told CNBC that you should consider your approximate annual income and budget, instead of simply identifying a large end goal for retirement savings.

For example, if you multiply your estimated annual budget, such as $100,000, by a factor of 25, the result will yield a generic lump sum that could cover you in retirement. That number would be $2.5 million in this case, Patel said.

Cutting down on your costs and creating goals for how much money you want to put aside across the coming months can also help you get into a saving mindset.

Costs you may want to consider in your retirement years when saving and planning also include vacations, time spent with children and grandchildren, and healthcare plans like Medicare, according to MarketWatch.

About the Author