If you roam financial websites enough, you’ll frequently see “Magic Number” articles published with a scary headline suggesting you need millions for a happy and fulfilling retirement.

However, like many things sold rather than bought, the fear and intimidation used to get you to act now and start saving fall flat. More importantly, as many financial planning experts point out, these calls to action are overkill. Most people don’t need millions to live happily in retirement. 

“I know from personal and professional experience that information like that isn’t useful, and we need to be useful to people,” Walpole, Mass., semi-retired financial planner John Power told Financial Advisor magazine in September.  

There are several arguments to make why the so-called magic number isn’t the be-all and end-all of financial planning. Here are three of those reasons.

Key Points About This Article:

• No two situations are similar, making a “Magic Number” irrelevant. 
• A mortgage-free household should have an advantage in saving for retirement.
• Don’t forget your Social Security and pension contributions will also make a difference.
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Everyone’s Circumstances Are Different

If every person’s financial situation were the same, it would make sense for there to be a magic number. After all, if we earn, spend, and save the same, it would be a slam dunk. 

Unfortunately, that’s not the case. Everyone’s situation is different. 

One thing to consider when contemplating your number–even though experts agree there isn’t a one-size-fits-all dollar figure to hang your hat on–is your lifestyle. 

Bloomberg recently profiled Shigeru Fujimoto, an 88-year-old Japanese man who owned a pet shop and mahjong parlors during his working years. In 1986, he sold his mahjong parlors for 65 million Japanese yen ($453,000) and began investing full-time, adding day trading to his resume in 2015. 

Fujimoto turned the sale proceeds into $14 million, a nearly 10% compound annual growth rate over 38 years. 

Building a $14 million retirement portfolio is overkill for someone like Fujimoto, who lives without a smartphone or car. However, if he dined out every night at expensive restaurants, it would be appropriate to save and invest to build a large sum necessary to finance this lifestyle. 

For this 88-year-old, even a $2 million retirement fund would likely have been extravagant given his needs.  

How’s Your Mortgage?

Most Americans’ biggest purchase is their home. According to Zillow, the average U.S. home cost $361,000 as of Aug. 31, while the average 30-year fixed rate mortgage was $393,340, according to the Mortgage Bankers Association of America. 

At first glance, one might be confused by the fact the average mortgage is higher than the average cost of a home. However, accounting for expensive cities like New York and San Francisco, where home prices can run well into the millions, it helps explain the imbalance. 

Suppose we have two identical 50-year-old people living in New York and Jackson, Mississippi. The former has an average home valued at $755,137 with a mortgage of approximately half, while the latter has a home valued at $64,561 with no mortgage, having paid it off two decades ago.   

While the New York City resident possesses considerable equity in their home, they could still be paying for it in retirement, while the Jackson resident has likely been able to save and invest a considerable amount of their take-home pay over the past two decades. 

So, if the two met with financial planners to figure out a retirement plan in 15 years, there’s a good chance that the Jackson homeowner’s plan would be much less demanding on their daily lifestyle than the New York City homeowner’s. 

It might be a big asset but is also often a significant liability. 

Social Security and Pensions Make a Difference

Let’s say, hypothetically, one person was an Olympic athlete throughout their 20s and well into their 30s before retiring and starting their work career. Another person went into the trades as an apprentice in their late teens, becoming a certified plumber after the apprenticeship. 

In those two instances, the amount each person paid in Social Security taxes would be completely different. In the former case, without official earned income, there would likely be no Social Security taxes, while the latter and their employer would each pay 6.2% of their annual wages up to a maximum of $168,600 in 2024, or $10,453.20. 

Multiply that over 10-15 years, and it could affect how much the former receives in Social Security Benefits in retirement. Further, if the plumber belonged to a union and had a pension plan, they would also receive pension benefits in their 60s and 70s on top of Social Security. 

So, the magic number for the athlete might be completely different (much higher) from the plumber’s. It all comes back to your situation and past work history, which is different for everyone. 

Social Security and pensions can affect how much you need to save for retirement. It is a big reason hiring a financial planner has become so important.

Unfortunately, there is a significant shortage, with just one CFP (Certified Financial Planner) for every 1,327 U.S. households, compared to one physician for every 119 households.  

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