A million dollars ain’t what it used to be.
There are more millionaires in the United States and the world than ever before, with nearly 24.5 million millionaires nationwide as of 2022, according to Credit Suisse Research Institute’s latest Global Wealth Report. Still, having seven figures in the bank offers less security than before against inflation and extreme market swings.
“That brand is easier to get, but it may not deliver what we expect,” said Dave Goodsell, executive director of the Natixis Center for Investor Insight.
These days, fewer Americans, including millionaires, feel secure about their financial situation.
More Personal Finance content:
Congress can make it easier to save for emergencies
Inflation increases spending for American families by $433 a month
How to save on groceries amid food price inflation
Even among high net worth individuals, 58% say they accept that they will have to continue working longer and 36% worry that retirement is not even an option, according to the latest data from Natixis Investment Managers.
In fact, 35% of millionaires said their ability to be financially secure in retirement “is going to be a miracle,” according to the survey of more than 8,500 individual investors.
Americans now expect to need $1.25 billion to retire comfortably as higher costs hit household budgets, a separate Northwestern Mutual study found — a 20% jump from $1.05 billion mentioned last year.
“A million may sound like a lot, but many people are surprised when they do the math and realize that 4% of $1 million is only $40,000 a year,” Goodsell said. “That’s usually a little less than what these individuals are probably used to living with.”
The 4% rule is a popular guideline for retirees to determine how much money they can live on each year without fear of running out later.
However, given current market expectations, the 4% rule “may no longer be viable,” Morningstar researchers wrote in a recent paper.
Retirement rules are ‘outdated’
“A lot of the rules of thumb that we’ve been using are outdated,” Goodsell said.
At the same time, the average 401(k) balance is now down 23% from a year ago to $97,200, according to Fidelity Investments, the nation’s largest provider of 401(k) plans.
“Maybe you have that million dollars, but you got 20% success,” Goodsell said. “On top of that, the prices are higher.”
Another Bankrate.com survey also found that 55% of American workers now feel they are behind on their retirement savings amid persistently high inflation and market volatility.
“People have to look at how much they have and take the time to do the math to see how long it will last,” Goodsell said. “The name of the game is preservation.”
Subscribe to CNBC on YouTube.