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What’s the magic number you need in savings to have a comfortable retirement? Americans now predict they’ll require $1.46 million to bankroll their third acts: the highest estimate on record, according to research released Tuesday.
That's yet another uptick in the sum of money U.S. adults think they'll need to retire, according to wealth management company Northwestern Mutual’s 2024 Planning & Progress study. But their actual retirement savings are far from their expectations of how much retirement will cost.
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How much money do you need to retire?
Northwestern Mutual's survey — which included responses from about 4,500 Americans 18 and up reached in January — found that, across generations, people think they’ll need upwards of $1 million to retire comfortably.
The average estimate, $1.46 million, is a 15% increase from last year. It's also a huge jump from 2020, when people guessed they'd need $951,000 to retire.
But Americans' actual savings aren’t even close to that — in fact, they’ve declined as their cost expectations have risen. This year, the average amount adults have saved is just $88,400, a bit less than the $89,300 recorded by Northwestern Mutual last year. That’s a $10,000 drop from the average amount of retirement savings in 2021, when the metric hit its five-year peak of $98,800.
“People’s ‘magic number’ to retire comfortably has exploded to an all-time high, and the gap between their goals and progress has never been wider,” Aditi Javeri Gokhale, Northwestern Mutual's chief strategy officer, president of retail investments and head of institutional investments, said in a news release.
That’s true for every age group, the study found:
- Respondents in Gen Z, which includes people born between 1996 and 2021, had the highest expectations for what they’ll need to retire at $1.63 million, though their average savings were just $22,800.
- Millennials, born between 1981 and 1995, said they’ll need $1.65 million compared to their actual average savings of $62,600.
- Gen Xers, born between about 1965 and 1980, estimated that they’ll need $1.56 million but have only $108,600 saved on average.
- Baby boomers, born between 1955 and 1964, had the smallest gap between their retirement expectations and reality, estimating that they’ll need $990,000 while their average savings were $120,300.
There's no universally agreed-upon target number when it comes to retirement savings. The amount you need depends on factors like your location, the age you want to retire, lifestyle expectations and how long you expect to live. As a general rule, though, financial services firm Fidelity recommends saving 10 times your final salary to retire at 67. Another strategy is to save enough so that you'll have 80% of your pre-retirement income each year in retirement.
Preparing for retirement amid a looming savings crisis
Inflation may be influencing people’s expectations for retirement savings, according to Javeri Gokhale. As everything from housing to food has exploded in cost in recent years, it's natural that Americans are giving more thought to how variables like rising prices will impact their retirement.
On the flip side, the decline in what they’re squirreling away reflects the growing retirement crisis as competing expenses and other factors limit Americans’ ability to save. A February report from the Senate’s Health, Education, Labor and Pensions Committee found that over half of all Americans are facing financial insecurity in retirement. Roughly half of people 55 and older have nothing saved at all.
The study also showed that Gen Xers, who are quickly approaching retirement age, and baby boomers aren’t very confident in their retirement readiness. Only 35% of Gen Xers said they’ve planned for the possibility of outliving their savings, while 37% of Boomers said the same. Only about half of Boomers and 40% of Gen Xers said they know how much they’ll need to retire.
What’s more, Americans overall may be underestimating how much taxes will impact their savings. Only 30% said they have a plan to minimize their tax bills in retirement.
“Putting money into a 401(k) may not be enough to retire comfortably if the financial plan doesn’t address the impact of taxes on retirement income,” Javeri Gokhale said, adding that it may be taxed 20% or 30% upon withdrawal.
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FAQs
The average estimate, $1.46 million, is a 15% increase from last year. It's also a huge jump from 2020, when people guessed they'd need $951,000 to retire. But Americans' actual savings aren't even close to that — in fact, they've declined as their cost expectations have risen.
Do Americans think they need $1.46 million to retire comfortably? ›
When it comes to retirement, Americans have a new number in mind — $1.46 million — for how much they think they will need to live comfortably, according to new research from Northwestern Mutual.
Do Americans now say they need $1.5 million to retire? ›
$1.46 million. That's what U.S. adults believe they'll need to save to live comfortably throughout their retirement years, according to Northwestern Mutual's latest “Planning & Progress Study” surveying Americans' views on their long-term financial security.
Why is 1.46 million the new magic number for retirement? ›
Americans' “magic number” for retirement surged to an all-time high – rising much faster than the rate of inflation while swelling more than 50% since the onset of the pandemic.
How much will you need to retire when America's Magic number surges to $1.46 million? ›
America's 'magic number' surges to $1.46 million. American adults believe they will need $1.46 million to retire comfortably, a 15% increase from last year and a massive 54% jump from what Americans said in 2020 that they expected they'd need.
Is $4,000,000 enough to retire? ›
Looking to retire on $4 million? If you leave work at 61, the average retirement age as of the latest Gallup data, you'll have more than enough to see you through to a life expectancy of 90 or even 100. Across 29 years, $4 million could equate to a generous $11,494 a month.
Is $3,000,000 enough to retire? ›
Yes, if you've managed to gather $3 million to fund your retirement, this should be more than enough to see you through in most cases.
Can $1 million dollars last 30 years in retirement? ›
Americans looking to stretch their retirement savings may want to head to states in the South or the Midwest, a recent analysis suggests. Around the U.S., a $1 million nest egg can cover an average of 18.9 years worth of living expenses, GoBankingRates found.
How much does the average American have saved for retirement? ›
The answer depends almost entirely on you, your habits now and your plans for later,” the financial services firm noted on its website. Data from the Federal Reserve's most recent Survey of Consumer Finances (2022) indicates the median retirement savings account balance for all U.S. families stands at $87,000.
At what age should you have $1 million in retirement? ›
Based on this, if you retire at age 65 and live until you turn 84, $1 million will probably be enough retirement savings for you. However, it's important to remember there is no one-size-fits-all amount.
A $1 million retirement account gives you around $40,000 per year for the first few years of your retirement. Once Social Security kicks in, this will give you on average anywhere from $65,000 to $95,000 per year depending on your lifetime earnings and when you began collecting benefits.
How much will $10 million generate in retirement? ›
Now that we know 10 million dollars can generate between $250,000 – $500,000 a year risk-free without the help from Social Security, let's go through a budget. Let's stay conservative and say 10 million dollars can generate $250,000 a year in relatively low-risk retirement income.
How many years will $2 million dollars last in retirement? ›
You retire at 40 – With an estimated life expectancy of 90, you need 50 years of income. Across those years, $2 million could equate to approximately $40,000 annually or $3,333 monthly. This should be enough to cover you, but things may be tight if your outgoings are high as a retiree.
What is a comfortable amount of money to retire with? ›
By age 40, you should have accumulated three times your current income for retirement. By retirement age, it should be 10 to 12 times your income at that time to be reasonably confident that you'll have enough funds. Seamless transition — roughly 80% of your pre-retirement income.
How long will $1 5 million last in retirement? ›
A $1.5 million portfolio consisting entirely of bonds meant to keep pace with inflation can reasonably be expected to last 25 years. While you'll need to progressively take out more from your portfolio to have the same buying power, your portfolio should keep up with or even beat the inflation rate.
How much annuity will $1,000,000 buy? ›
According to SmartAsset, they might expect to receive between $4,500 and $6,500 per month for the rest of their lives or the specified duration of the annuity contract.
What amount of money Americans think they need to retire comfortably hits the record high? ›
A new study published by Northwestern Mutual found the "magic number" that Americans believe they need in order to retire comfortably hit $1.46 million this year, the highest level on record.
How much do you need to retire comfortably in USA? ›
By age 40, you should have accumulated three times your current income for retirement. By retirement age, it should be 10 to 12 times your income at that time to be reasonably confident that you'll have enough funds. Seamless transition — roughly 80% of your pre-retirement income.
How much money does the average American retire with? ›
What are the average and median retirement savings? The average retirement savings for all families is $333,940, according to the 2022 Survey of Consumer Finances. The median retirement savings for all families is $87,000. Taken on their own, those numbers aren't incredibly helpful.
How much Americans think they need for retirement vs what they actually have saved are miles apart.? ›
Gen X — those born between 1965 and 1980 — say they will need, on average, $1.56 million in savings to retire comfortably, but to date, they have only $109,600. Gen Z and millennials expect to need more than $1.6 million to retire comfortably but currently have $22,800 and $62,600 set aside, respectively.
