I've Saved $1 Million for Retirement. Am I Done?

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The average American aged 65 to 74 has about $609,000 in retirement savings, according to the Federal Reserve. But the median retirement savings balance among people in that age group is only $200,000.

This tells us that most older Americans probably have closer to $200,000 than $609,000, and that it's a small percentage of wealthy savers who are bringing the average up. But either way, if you have $1 million in retirement savings, you might assume that you're in great shape.

And to be clear, you are. A $1 million nest egg is a fantastic accomplishment, and one you ought to be proud of.

But if you're still working, does $1 million in retirement savings mean you can stop putting money away for the future? You'd think the answer would be yes. But you may want to aim for more than $1 million in savings for one big reason.

You might really need that money to last

When you look at a figure like $1 million, it's hard to imagine that money running out in your lifetime. But remember, when you're working, you use your savings to pay for things like home repairs or vacations -- expenses that don't come up every week.

When you're retired, you might use your savings to cover everything -- groceries, transportation, utility bills, healthcare expenses, and more. So a $1 million balance could get whittled down pretty quickly when your savings are one of your primary income sources.

Also, if we follow the famous 4% rule that financial experts have long recommended, a $1 million nest egg translates into about $40,000 of annual income (the rule has you taking out 4% of your balance each year, with some adjustments for inflation).

Now $40,000 plus whatever you get from Social Security may be enough income to allow for a comfortable lifestyle. But if you were a higher earner (which, if you've managed to save $1 million for retirement, may be the case), then it may not be so easy to live on a much lower income as a retiree. So that's another reason not to stop saving just because you've reached the $1 million mark.

How to approach retirement with well over $1 million

You might think that getting to even the $1 million mark in retirement savings is next to impossible. But with the right strategy, you might set yourself up to retire with twice that sum -- or more.

To pull that off, though, you have to to do two things:

• Start funding your IRA or 401(k) as soon as you start collecting a steady paycheck
• Invest your savings in the stock market for maximum growth

Over the past 50 years, the stock market's average annual return has been 10%. If you invest in the market over a period of multiple decades, there's a good chance your portfolio will perform similarly.

So let's say you're able to save $300 a month for retirement between the ages of 22 and 67. At a return of 10% per year, you're looking at a nest egg worth almost $2.6 million.

Even if you don't start saving for retirement at quite such a young age, if you save that $300 between ages 27 and 67, at that same 10% return, you're looking at about $1.6 million. And if you narrow your savings window to 40 years instead of 45 but also up your IRA or 401(k) contributions to $400 a month, you're back up to $2.1 million.

You're in good shape, but you can still keep pushing

All told, you're definitely not in bad shape if you've managed to save $1 million for retirement. But don't assume your work is done there. It's easy to make the case to keep saving more if you're able to and it won't negatively impact your quality of life.

Of course, if you've saved $1 million for retirement and you're already in your mid-60s and burned out, then you may decide to call it quits knowing you've got a nice nest egg to fall back on. Or, you may decide to work one more year, but spend all of your money on yourself.

But if you're sitting on $1 million at age 55 and you can pretty comfortably keep funding your IRA or 401(k), why not do so? There's really no such thing as having too much retirement income, so if it's not a strain, keep pumping money into your nest egg while you can.

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