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For most Americans, the “magic number” for retirement is $1.26 million, according to Northwestern Mutual. (1)
But it’s easy to forget that retirement isn’t really about hitting a specific dollar target — it’s about replacing your income so you can sustain your lifestyle without working.
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This crucial difference was highlighted in JPMorgan Asset Management’s 2025 Guide to Retirement. (2) The banking giant’s guide shows that many people can retire comfortably if they shift their attention away from becoming millionaires to simply replacing their current income.
Here’s a closer look at the underlying calculations.
Income replacement
If your primary objective is to replace your current income, then you’ll require a more modest amount for retirement if you’re lower or middle income.
JPMorgan’s report shows that households with relatively low income can rely more on Social Security benefits and employer-backed private retirement schemes, replacing their current earnings, relative to higher earners. A family earning $300,000, for instance, could see only 55% of their income replaced by these sources.
Therefore, according to JPMorgan’s calculations, for households with annual income of $125,000 and above, a seven-figure savings target could be justified.
Their income replacement calculations suggest that for households with income below $90,000, you can maintain an equivalent lifestyle in retirement with a 5% annual gross savings rate, or $4,500 per year. The average personal savings rate for Americans was 4.6% in August, according to the Bureau of Economic Analysis. (3)
Meanwhile, for households making $100,000 or more, JP Morgan’s analysis uses a 10% annual gross savings rate instead.
While those may seem like lofty numbers, there are ways to grow your savings in the background to easily build wealth for retirement.
With Acorns, every purchase on your credit or debit card is automatically rounded up to the nearest dollar, with the excess placed into a smart investment portfolio.
Let’s say you purchase a doughnut for $2.30. Before you’re done licking the sugar off your fingers, Acorns will round the amount to $3.00 and invest the 70-cent difference for you.
Look at this math: $2.50 worth of daily round-ups adds up to $900 per year — and that’s before your savings earn money in the market. If you’re a little short of your savings rate goal, this could easily take you over the line.
Plus, if you sign up now with a recurring monthly deposit of at least $5, you can get a $20 bonus investment. This can give you an extra boost if the round-ups aren’t quite enough to meet your goals.
However, your retirement savings checkpoint will depend on your household income.
A 40-year-old with a household income of $50,000 should have current savings of $105,000. On the other hand, a 40-year-old with a household income of $90,000 should have current savings of $220,000.
For someone with average earnings who retired in 2024 at age 65, Social Security benefits replaced about 39% of past earnings, according to the Centre on Budget and Policy Priorities (CBPP). (4) It’s likely that many of these retirees also had other sources of income, such as private retirement plans that cover a portion of their needs.
Regardless, make sure you have an emergency fund set aside, no matter how much you manage to stow away in retirement investments. After all, you’ll want to have an easily accessible account that you can dip into if need be.
To get started, a high-yield account, such as a Wealthfront Cash Account, can be a great place to grow your emergency funds, offering both competitive interest rates and easy access to your cash when you need it.
A Wealthfront Cash Account can provide a base variable APY of 3.75%, but Moneywise readers can get an exclusive 0.50% boost over their first three months for a boosted APY of 4.25% provided by program banks on your uninvested cash. That’s over ten times the national deposit savings rate, according to the FDIC’s September report.
With no minimum balances or account fees, as well as 24/7 withdrawals and free domestic wire transfers, you can ensure your funds remain accessible at all times. Plus, Wealthfront Cash Account balances of up to $16 million per depositor are insured by the FDIC through program banks.
Read more: How much cash do you plan to keep on hand after you retire? Here are 3 of the biggest reasons you’ll need a substantial stash of savings in retirement
Realistic targets
While an arbitrary savings target might simplify your retirement plan, it isn’t always realistic. According to Investopedia’s analysis of Federal Reserve data, only 3.2% of retirees and only about 2.6% of Americans have $1 million in retirement. (5) That means a seven-figure target is unrealistic for most.
Based on the income-replacement model, JPMorgan estimates that the typical American household needs far less than $1 million to retire comfortably. A household earning $90,000, for example, with an annual gross savings rate of 5% should reach $700,000 in savings by the age of 65 to “maintain an equivalent lifestyle in retirement.”
If the household earns $30,000 or $50,000, the target is $175,000 and $350,000, respectively.
The numbers will vary greatly, which is one of many reasons it might be worth speaking with a qualified professional about your retirement goals.
Advisor.com can help connect you with a financial advisor suited to your needs and based in your area. All of their advisors are pre-vetted fiduciaries, meaning that they have a legal obligation to act in your best interest.
After inputting your ZIP code to get matched with a nearby financial professional, you can set up a free call with no obligation to hire to make sure they’re a good fit for you.
Once you know your benchmark, you could then use Monarch Money’s all-in-one budgeting app to track your progress.
Monarch Money puts all your finances under one roof, from your banking statements to your investments. You can also add separate or joint accounts to your dashboard, which can be great for tracking your household retirement savings rather than having to manually combine information from all of your accounts.
The app is also well reviewed. Forbes and the Wall Street Journal ranked Monarch Money as their best budgeting app for 2025.
The best part? Monarch Money offers a seven-day free trial so you can see if it’s right for you. If you like what you see, you could then snag 50% off with code MONARCHVIP to get a bird’s eye view on your path to retirement.
Other ways to grow your income
Beyond building your nest egg through cash, savings and investing strategies, it may be worth considering alternative assets such as real estate.
Investing in real estate can add diversification to your portfolio and can provide regular income distributions as well.
But if you aren’t ready to jump into home ownership (financially or otherwise), there are platforms like Arrived that let you buy stakes in rental properties, earn dividends and skip the responsibilities of property management.
Backed by world-class investors like Jeff Bezos, Arrived’s easy-to-use platform offers SEC-qualified investments such as rental homes and vacation rentals for as little as $100.
Their flexible investment options allow both accredited and non-accredited investors to benefit from this inflation-hedging asset class with ease. You can start by browsing vetted properties, then it’s as simple as selecting a property and choosing the number of shares to buy.
You could also invest in home equity. While the $34.9 trillion U.S. home equity market has historically been reserved for large institutions, Homeshares is stirring things up.
Homeshares allows accredited investors to gain direct exposure to a portfolio of owner-occupied homes in top U.S. cities through their U.S. Home Equity Fund — without the hassles of buying, owning or managing property.
And the best part? For a limited time, Homeshares will provide Moneywise readers with an exclusive 5% bonus on IRA investments to get you even further ahead.
The fund focuses on homes with substantial equity, using Home Equity Agreements (HEAs) to let homeowners access liquidity without taking on debt or interest payments. This can create an attractive, low-maintenance investment vehicle for retirement savers, with a minimum investment of $25,000.
With risk-adjusted target returns of 14% to 17%, the U.S. Home Equity Fund offers investors access to America’s largest store of household wealth.
Future cuts to Social Security
JPMorgan’s calculations hinge on the supplemental income from Social Security; however, the program’s funding is in jeopardy.
Beneficiaries could face a 24% cut by 2032, according to the Committee for a Responsible Federal Budget (CRFB), and a 30% or greater cut by 2099. (6)
The bank acknowledges that this can be avoided if Congress acts to bolster the program’s trust funds before they run dry, but if you are relatively young and not optimistic about lawmakers solving this problem, you may need a higher savings target to ensure a comfortable retirement.
What to read next
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Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Northwestern Mutual (1); JP Morgan (2); Bureau of Economic Analysis (3); Centre on Budget and Policy Priorities (4); Investopedia (5); Committee for a Responsible Federal Budget (6)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.