Personal Finance

How Many Americans Have Banked a Cool $5 Million for Retirement?

Joey Frenette

Published: December 19, 2024 9:20 am

Last Updated: December 19, 2024 9:21 am

In my last piece, I noted that just over 3% of Americans have saved up at least $1 million for retirement. Undoubtedly, the handsome seven-figure sum, which can power retirement in an affordable city, is what many savers and 401k contributors aspire to save hit before they’re comfortable hitting the retirement button.

As always, there’s no magic savings number that works for everyone. Ultimately, the perfect retirement fund figure comes down to how your expenses stack up to the potential passive income (think pensions, investment income, and gig income). For lavish spenders who live in Manhattan, it could take more than $5 million to finance a sustained retirement. For those living in rural Nebraska, however, that magic number is probably closer to $1 million.

Of course, it’s always tempting to raise the bar after you’ve hit your retirement milestone, especially if your employee tempts you to stick around with pay raises, travel opportunities, bonuses, and more perks that could make it difficult to break free from the so-called golden handcuffs.

In any case, this piece will look into the retirement overachievers, with at least $5 million stashed away for retirement. As always, contact a financial advisor so that they can give you a ballpark figure to aim for, along with a realistic retirement date.

Key Points About This Article

• Not many Americans have saved up $5 million or more for retirement.
• Don’t aim too high with your retirement goals. Ask a financial advisor to help you find your number.
• Retiring early is possible, and may be easier than you think. Click here now to see if you’re ahead, or behind. ^(Sponsor)

How many Americans have managed to save a handsome $5 million?

According to the Employee Benefit Research Institute, the same source I used to determine how many Americans have banked at least $1 million, a mere 0.1% of Americans have a retirement nest egg worth $5 million or more. Undoubtedly, it’s not a shocker to hear that only one in a thousand have reached the milestone. Even if the ongoing bull market in stocks carries for a few years longer (the S&P 500 may very well post its third straight year of more than 20% returns), it’s tough to tell whether the 0.1% figure will expand meaningfully.

In any case, if you’re a high-income earner committed to living in a pricey city (let’s say Vancouver, B.C. or San Fransico) in comfort, you may just need to join the $5 million retirement club to fund your lifestyle.

Of course, you may not need that much if you live a frugal lifestyle, have no children, and have a fully-paid home. In any case, I believe it takes more than a frugal budget and a hefty income to join the 0.1%. You need to play the long game with your financial plan and have the right long-term investments. Also, you may need to forego big expenses, earn big promotions, and stay working through your 60s.

Learn how to temper emotions during the market’s inevitable ups and downs.

In my humble opinion, you don’t need to be a seasoned trader or investment guru to unlock the power of compound investing. However, what you do need are durable businesses at your portfolio’s core. And preferably, you should top up such positions in times of market weakness. These days, the stock market is running hot, and the risk of a painful bear market plunge is very real. That’s why having the right mindset, mix of investments and a long-term horizon are key if you’re shooting high with your retirement fund.

Whether you’re a stock picker or an index fund investor (the S&P 500 and Nasdaq 100 funds are among the best for younger investors seeking aggressive growth), having the ability to stay skeptical during bull runs and optimistic during bear markets, I believe, is key to long-term success.

Indeed, if you take risks in stocks, you must know how to ride out the pitfalls that will eventually show themselves. We’ve been treated to solid gains and a smooth ride in the past two years.

Whether the road gets bumpier and less rewarding from here, though, remains to be seen. Either way, Americans looking to grow their retirement by leaps and bounds must know how to navigate the terrain if they seek to join the 3.2% or so of Americans who’ve seen their wealth break the seven-figure mark.

The most significant danger, I believe, in aiming for too high a figure lies in taking on too much risk with their investments. That’s why consulting an advisor is critical for savers so they can not only achieve their goals but also remove the potential risks that could set their retirement back by years or even decades.

The bottom line

For many, saving $5 million for retirement is simply out of the cards. With just 0.1% of Americans reportedly having accomplished the feat, the goal seems excessive and unrealistic.

If you’re a high-income earner with low monthly expenses and the ability to navigate markets without losing your temperament, however, an ambitious $5 million target may not be “too high” to aim for. An advisor can help let you know if it’s a realistic target and suggest other options to help get you to your magic number, whatever it may be.

Save, contribute, optimize, invest, compound, and you may surprise yourself with how much you’ve grown your wealth in a few decades down the road.

As for shooting for $5 million, I think that’s setting the bar way too high, at least for most Americans who don’t care for luxuries. Instead, I’d shoot for smaller milestones based on what you’ve got currently and work from there.