A cool $1 million is not what it used to be.
There are more millionaires in the U.S. and globally than ever before, with nearly 24.5 million millionaires nationwide as of 2022, according to the latest Global Wealth Report from the Credit Suisse Research Institute. Even so, having seven figures in the bank offers less security than it used to in the face of inflation and extreme market swings.
“That mark is easier to obtain 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 confident about their financial standing.
Even among high net worth individuals, 58% said they accept that they will have to keep working longer and 36% worry that retirement may not even be 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 take a miracle,” the survey of more than 8,500 individual investors found.
Americans now expect they will need $1.25 million to retire comfortably as higher costs strain household budgets, a separate study from Northwestern Mutual found — a 20% jump from the $1.05 million respondents cited last year.
“A million may seem like a lot, but many people are surprised when they do the math and realize that 4% of $1 million is only $40,000 yearly,” Goodsell said. “This is usually quite a bit less than these individuals are likely used to living on.”
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 feasible,” researchers at Morningstar wrote in a recent paper.
“A lot of the rules of thumb we’ve been using are outdated,” Goodsell said.
“Maybe you have that $1 million but you’ve taken a 20% hit on it,” Goodsell said. “On top of that, prices are higher.”
Another survey from Bankrate.com also found 55% of working Americans now feel they are behind in their retirement savings amid persistent high inflation and market volatility.
“People need to look at how much they have and take the time to do the math to see how long that will last,” Goodsell said. “The name of the game is preservation.”
(With inputs from CNBC)