i have recovery contact, but macos tell me "recovery contact needed".

There is definitely something wrong here, but it doesn't seem to be getting much visibility. What worked for me was to just delete my existing recovery contact and then recreate it. This is dumb and annoying and it shouldn't be this way, but if you just want to clear the error message and get on with your life, it'll work.

Thanks Jim Miller2, that did the trick. But on my iMac, I had to manually go to System Settings, My Apple ID, Sign-In & Security, Account Recovery, then under Recovery Contact: and remove them all first. Then re-add someone, or multiple. I’m glad for the community of support, that red dot on my settings would have bothered me to the extreme.

This has to be a bug, I have this issue also. I already have one but if I go to add one it doesn't show that, and when I try to add the one I know I already have it says I can't add them because they're already my recovery contact.

Serious and dangerous bug for the OS in terms of security and protecting users from data loss. Hope they fix it soon.

Same here. I got this report after updating my MBP to 14.1. Oops...