For decades, “a million dollars” has been shorthand for retirement security. It’s also close to useless as a planning target, because a savings balance doesn’t tell you whether you can retire. What tells you is the relationship between what you plan to spend and what your income sources can reliably produce.
Why the $1 million benchmark falls short
The number ignores three things that determine everything.
Social Security. For most households, it’s the largest retirement asset: guaranteed, inflation-adjusted income for life. Replicating it with a portfolio would take hundreds of thousands of dollars. Leave it out and you’ll badly overestimate what you need to save.
Spending. A household spending $65,000 a year needs a fundamentally different portfolio than one spending $95,000.
Taxes. A million dollars in a traditional 401(k) isn’t a million dollars. The same balance in a Roth is worth meaningfully more in spendable terms.
The number that matters isn’t a savings target. It’s an income gap.
Four steps to your actual number
1. Estimate annual retirement spending. Start with twelve months of real statements, not a percentage of income. Some costs fall: commuting, payroll taxes, retirement contributions. Others rise. Many people find their first years of retirement cost more than their working years.
2. Add up guaranteed income. Pull your actual projected benefit from your my Social Security account rather than estimating. Add any pension or annuity income. For context, the 2026 cost-of-living adjustment of 2.8% brought the average retired worker’s benefit to roughly $2,064 a month.
3. Find the gap. Subtract guaranteed income from planned spending. What’s left is what your portfolio has to cover. (If you’d rather not do it by hand, our retirement income gap calculator will run this for you, including what inflation does to the gap over ten and twenty years.)
4. Multiply. Divide the gap by a sustainable withdrawal rate. Morningstar’s 2026 research currently puts the base-case safe starting rate at 3.9% over a 30-year retirement, below the 4% figure most of us grew up hearing — a figure that shifts with market conditions, so treat it as a starting point rather than a fixed rule.
The formula in one line: (annual spending − guaranteed income) ÷ 0.039 = your target portfolio. Dividing by 3.9% is the same as multiplying by roughly 25.6.
Run it twice, once at your current spending and once at $10,000 lower. The gap between the two targets will be more than $250,000. Your spending assumption has more leverage over your retirement readiness than your return assumption does, and unlike markets, it’s something you control.
With the many individuals we have helped through retirement, in many cases we find that individuals and couples underestimate what they will spend in retirement or that in the case of spouse, each may have a different spending number all together. It is important to be as accurate as possible on your expected spending because it can dramatically change future outcomes.
The target tells you how much. It doesn’t tell you where next year’s grocery money comes from when the market is down 20%. That’s a structural question, and the usual answer is to organize the portfolio by when you’ll spend it: roughly a year of expenses in cash, the next several years in a ladder of individual bonds that mature one per year to refill that cash, and the rest invested for growth it has a decade or more to earn. Because the near-term money is never at market risk, a downturn doesn’t force you to sell equities to eat — which is what turns an ordinary bad year into permanent damage. We walk through the full structure, including how the bond ladder refills itself, on our retirement income planning page.
Three forces that reshape the math
Inflation. At 3% a year, a $75,000 lifestyle costs about $135,000 after two decades. A portfolio that feels comfortably conservative can become its own risk over thirty years.
Healthcare. Fidelity now estimates a 65-year-old retiring in 2026 will spend an average of $185,500 on healthcare, up 7.5% in a single year, and that figure excludes long-term care entirely. Medical inflation also runs well ahead of the Social Security COLA, so a plan assuming your benefit keeps pace with your medical costs deserves a second look.
Longevity. Planning to 85 is planning to run out of money if you live to 92. This is why claiming timing matters: for anyone born in 1960 or later, full retirement age is 67, claiming at 62 permanently cuts your benefit by about 30%, and delaying past 67 adds roughly 8% a year until 70.
Where do you land?
Ahead of the number. The work shifts to efficiency: tax location, Roth conversions in the low-income years — timing we walk through in detail — before required distributions, and what the money should do beyond funding your own retirement.
Close. The most common position, and a good one. Working two additional years adds contributions, removes two years of withdrawals, and raises your Social Security benefit at the same time.
Behind. You have more tools than you think. For 2026, the IRS limits allow $24,500 in 401(k) deferrals, plus an $8,000 catch-up at 50 and over, or $11,250 if you’re between 60 and 63 and your plan permits it. Beyond contributions, the levers are spending, debt, and timing.
Where Fairvoy fits
The four steps above will tell you roughly where you stand. What they won’t resolve are the pieces that interact: which accounts to draw from first, when to claim Social Security, how much cash to hold so you’re never forced to sell into a down market, and how to keep taxes from quietly eroding what you’ve built.
That’s the work we do at Fairvoy. As fee-only fiduciary advisors, we build retirement income plans around what your life actually costs rather than a rule of thumb, and we’re paid by the people we advise, not by commissions on products. If you’d like to see your own numbers modeled properly, we’re glad to walk through them with you.
There’s no universal retirement number, and the ones in headlines produce anxiety without clarity. Run the calculation with your own figures, early enough to act on what you find. Most people discover their target is different from what they assumed. Often lower, and almost always more actionable.
Want to see your own numbers? Schedule a conversation with a Fairvoy advisor, or explore browse our retirement education library.
Disclosures
Fairvoy Private Wealth LLC is an SEC registered investment adviser located in Birmingham, Alabama. Registration as an investment adviser does not imply a certain level of skill or training. This article is provided for informational and educational purposes only and does not constitute legal or tax advice. Please consult a qualified tax or legal professional for guidance specific to your situation. Investing involves risk of loss including loss of principal.