On average, American workers today expect to need $1.27 million to retire comfortably, up from $1.25 million in 2022, reports the latest iteration of Northwestern Mutual’s Planning & Progress study.
The findings, released today, found that the number nearly triples for high net worth individuals, who say they anticipate needing $3 million to retire.
Those expectations may be less than what is realistic, the Northwestern Mutual study reported, as the average amount saved for retirement by investors modestly increased by 3% to $89,300, up from $86,869 in 2022.
“Americans’ magic number for retirement readiness continues to rise,” said Aditi Javeri Gokhale, chief strategy officer, head of institutional investments and president of retail investments at Northwestern Mutual, in a statement. “The good news is that they are saving and investing more for tomorrow, even in this time of high inflation and market volatility. That is a step in the right direction and a reverse of what we saw last year when the gap widened rather than narrowed. The challenging news is that there continues to be a big disparity between what they think they’ll need to retire and what they’ve saved to date.”
Those in their 50s anticipate requiring the most amount of money for retirement—at $1.56 million dollars—even if they’ve saved just $110,900 on average. People in their 20s expect to need $1.2 million dollars, and that raises to $1.44 million for those in their 30s. The number drops back down to $1.28 million once people reach their 40s, reported Northwestern Mutual.
Gen Z confident in retirement readiness
Among all respondents, Gen Z was the likeliest to believe they’ll be financially prepared once their retirement comes. Sixty-five percent of the youngest cohort said they would be financially set to retire once ready. In contrast, 55% of Gen Xers said they won’t be prepared, while 46% of Millennials and 48% of Baby Boomers (who are not retired yet) said the same.
In fact, Baby Boomers said they expect to work the longest, until age 71, while Gen Zers anticipate retiring more than a decade earlier at age 60. Millennials say they expect to retire at 63 years-old, and Gen Xers don’t expect to retire until age 65. On average, Americans expect to work until 65 years-old, up from 64 in 2022 and 62.6 in 2021.
Health concerns and longevity risk among top concerns
When asked about their biggest fears in retirement, 44% of Americans responded declining health and 43% replied outliving their savings. The report had found that on average, Americans believe there is a 45% chance they will outlive their savings. Still, one-third (33%) have not taken steps to address their longevity risk.
“What stood out to us in these findings is that concerns about outliving savings came in virtually equal to declining health,” said Javeri Gokhale. “Here again, proactivity is critical. In the same way that we rely on doctors to help us maintain good health, a trusted financial advisor can help us stay in financial shape.”
Another 31% say they fear “boredom,” while 27% do not want to lose their “sense of purpose.”
Among the smallest fears included feeling uncertain on where to focus time (17%), isolation from friends, families, and coworkers (17%), missing their career (16%), and relocating (7%). Seventy percent of respondents said they fear nothing at all when it comes to retirement.
With the future of Social Security solvency questioned, Northwestern Mutual found 42% of respondents say they can imagine a time when Social Security no longer exists.
Still, the research found that respondents are relying on Social Security to provide 28% of their overall retirement funding. That’s more than personal savings (22%) and equal to retirement savings (28%), found Northwestern Mutual. Other means of retirement funding include support from spouse/partner (8%), inheritance (6%), and support from children (3%).
Gen Z and Millennials were the least likely to anticipate Social Security, at 15% and 19%, respectively. Findings show this was much lower than what their older counterparts expected—at 27% for Gen Xers and 38% for Boomers.
SEE ALSO:
- Most Pre-Retirees Cite Inflation for Retirement Delay
- Most Americans Not Counting on Social Security for Retirement Income
- Professional Advice Must Drive Participant Retirement Income Decisions
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.