The following claims it does:
It uses the costs of these eight items (details on where they got the costs in the linked page):
Wow! That’s a lot of cars.
Two new cars every 10 years could mean 10 or so new cars over the lifetime for two people after they enter the work force. So that seems to be assuming about $90,000 per car over having it for 10 years (including insurance and maintenance). Presumably, they are looking at “average” new cars (about $49,000 these days) rather than less expensive ones (the cheapest new car in the US is about $20,000).
These numbers look high to me. This looks the the upper middle class version rather than the middle class version.
Too little for pets. Just the 5 cats definitely cost me more than $39K over their lifespans (15-17 years)! Add our beloved dog, and just his surgery was more than $7k.
Some numbers look slightly high, some numbers look slightly low. However, I do not think that this is all that far off.
For those of us who are older, we might be sitting in a house that we own that back when we bought it cost a lot less than $900,000. However, since most of us who purchase a home need to take out a mortgage, the total that we end up paying over time is significantly greater than the purchase price. What our kids are going to pay for homes, if they ever get to buy one, might be in this range. Of course we also need to pay for electricity and whatever we use to heat the home, and also pay for Internet access (just thought I would add this since we are discussing this using an online site).
The college number looks high, particularly if two kids both stop with a bachelor’s degree (or go on to a fully funded PhD). However, if you include the entire rest of “raising two children” the number might be not so far off.
I have heard a rough estimate that we should be able to take 4% per year from our long term investments without ever running out. 4% of the stated retirement amount comes to about $65,500 per year. This plus two social security payments (one per spouse) might be enough to live on in retirement, but does not imply luxury.
And the vacation number is presumably over an entire lifetime.
I do not think that we will hit the car number over our lifetimes. This number looks high to me. This might be partly due to my aversion to car loans (I drove junkers when I was younger). On the other hand, if you include maintenance and gasoline, again it might not be all that far off.
I think that the overall number is probably not too far off. I expect that it will continue to get greater over time.
The linked page says that raising two children up to age 18 is $645,819. College is separately listed as an additional $230,273 to make the total of both $876,092.
I followed the article that you linked because I was curious about how it defined the American Dream. In the first article, it lists the ability to pay for these items as signs of having achieved the American Dream (costing more than 5 million dollars).
- Retirement
- Healthcare
- Owning a home
- Raising two children and paying for college
- Purchasing new cars
- An annual vacation
- Owning pets
- Paying for a wedding
However, I tend to think of the American Dream not as the accumulation of those specific 8 items, but something closer to the definition used in another Investopedia article (which was linked to the first)
DEFINITION
The American Dream is the belief that anyone can achieve success through hard work in a society where upward mobility is possible for everyone.
In particular, I always thought of the American Dream as generational: the belief that you could have nothing (or immigrate to this country with nothing) and that your children and grandchildren will have a chance at more success and a better life than you had in your home country or even you had in the U.S.. So the social mobility is not so much for yourself but for your children. Now, I don’t really believe that even that more generational definition of the American Dream is attainable for many people. I think inequality can leave many families mired in poverty for multiple generations, still the more expansive definition doesn’t hinge upon whether of not I have those 8 items; instead it hinges upon whether my children have opportunities and freedoms that I did not.
And 5-8 are completely optional (and don’t hit my radar at all, much less my idea of “dream”).
The number that worries me is Healthcare. End of life care for at least one person I know was way more than the amount they quote just for his last 6 months of life. I feel like we need a very large pot of money set aside for late life/end of life care.
When I saw the title I thought it was 5mill for retirement
They are assuming owning a total of 2 pets over lifetime, rather than continually having pets – 1 dog who lives 13 years, and 1 cat who lives 11 years.
Pet expenses can be all over the map. If you don’t have major medical expenses, and don’t pay for services like doggy day care, groomers, walkers, trainers, … then expenses can be quite low. I average a few hundred dollars per year on my dog, not including indirect expenses like gas driving to dog beach or dog-friendly hiking areas. However, as you note major medical expenses can occur, such as surgeries costing $7k or substantially more. You could spend <$1k one year, then >$10k the next. Many get insurance to mitigate risk of the latter sudden expense, although average expense is usually lower without insurance.
Assumptions-schmassumptions. What kind of pet owner stops at 2? Besides, can never have too many cats. 
I have my priorities. 
Our car budget including everything is not even a third of that, but our vacation and pet budgets are way over!
The article doesn’t mention “luxury”. It mentions being able to afford the average retirement expense of $63,609 for 20 years. They seem to be assuming the retirement balance is stored as cash earning 0%, with 2.5% inflation (and hope you don’t live past 85 or have unexpected expenses in final years). However, as you note 4% rule of thumb comes to approximately the same total $63,609 * 25 = $1.6M.