The so-called “magic number” Americans have to reach in order to have a stable, secure retirement continues to rise, having made a jump of almost 15 percent in a single year, alongside a staggering 53 percent over the course of the last four years. Meanwhile, retirement savings are plummeting to $88,000. Yikes. This is just more evidence that our economy has been trashed by the Biden administration, making life more difficult for people rich, poor, young, and old.
The data comes from the top-level findings of a Northwestern Mutual 2024 Planning & Progress Study, which is the proprietary research series that takes a deep dive into the attitudes and behaviors of Americans concerning a specific set of issues that will have an impact on the long-term financial security.
According to PRN Newswire, Americans now believe they will need to save up a total of $1.46 million in order to have a comfortable retirement devoid of concern about paying for their homes, food and other necessities, healthcare, and unexpected expenses, the study revealed.
U.S. adults believe they will need $1.46 million to retire comfortably, a 15% increase over the $1.27 million reported last year, far outpacing today’s inflation rate which currently hovers between 2% and 3%. Over a five-year span, people’s ‘magic number’ has jumped a whopping 53% from the $951,000 target Americans reported in 2020.
By generation, both Gen Z and Millennials expect to need more than $1.6 million to retire comfortably. High-net-worth individuals – people with more than $1 million in investable assets – say they’ll need nearly $4 million.
Meanwhile, the average amount that U.S. adults have saved for retirement dropped modestly from $89,300 in 2023 to $88,400 today, but is more than $10,000 off its five-year peak of $98,800 in 2021.
“In 2023, the soaring cost of eggs in the grocery store symbolized inflation in America. In 2024, it’s nest eggs,” Aditi Javeri Gokhale, chief strategy officer, president of retail investments and head of institutional investments at Northwestern Mutual went on to say. “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. Inflation is expanding our expectations for retirement savings, and putting the pressure on to plan and stay disciplined. Making a ‘magic number’ appear isn’t about waving a wand; it’s about using time-tested techniques and learning from a skilled advisor.”
In just about every segment of the population there is a sizable gap between what folks believe they will need in order to retire, and what they have managed to save back up to the present date.
The study also found that the average American claimed they started to save for retirement around age 31. However, Gen Z is starting much, much earlier, at 22, which is also 15 years before Boomers and those who are older than them, who revealed that most of them did not begin seriously saving for retirement until they were 37. Millennials started at age 27 and Gen X began at 31.
The hope among Gen Z is that by starting to save sooner, they’ll be able to retire earlier. They expect to retire at the age of 60, a dozen years before Boomers+ who say they’ll work until they’re 72. Millennials and Gen X’ers expect to work until 64 and 67, respectively. The average age most people expect to work to is 65.
The study also uncovered that 3 out of every 10 Millennials and Gen Zers think it’s likely or highly likely that they will end up living to be 100 years of age. That’s quite an optimistic estimate, but with so many folks learning to eat better and exercise more, plus the constantly improving quality of healthcare, there’s a good chance they are correct. Not surprisingly, the other segments of the population weren’t nearly as optimistic about their life expectancy.
“These numbers tell a fascinating story about the profound shift in financial planning that has taken shape in America,” Javeri Gokhale remarked. “Young people today recognize the value of retirement planning and building wealth early on in life and are getting a significant head start over their parents and grandparents. At the same time, Gen Z is redefining retirement and signaling that they plan to have long and fulfilling post-career lives. The good news is that they are investing earlier so they can save the money they need to enjoy it.”
Another important aspect to take into consideration when planning for retirement is taxes. Ah, doesn’t everybody just love the sound of that word? Yeah, me neither. Unfortunately, for a lot of people, taxes are an afterthought.
“Putting money into a 401K may not be enough to retire comfortably if the financial plan doesn’t address the impact of taxes on retirement income,” Gokhale remarked. “Most people don’t realize that their retirement income may be taxed about 20% or 30% when they withdraw and spend it. When they recognize the impact, it’s often too late for them to adjust. A comprehensive financial plan can help people get to and through retirement by minimizing exposure and preventing anyone from paying more in taxes than they should be – potentially preserving thousands of dollars in their nest eggs.”
Here’s a little background information on the 2024 Northwestern Mutual Planning & Progress Study:
The 2024 Planning & Progress Study was conducted by The Harris Poll on behalf of Northwestern Mutual among 4,588 U.S. adults aged 18 or older. The survey was conducted online between January 3 and January 17, 2024. Data are weighted where necessary by age, gender, race/ethnicity, region, education, marital status, household size, and household income to bring them in line with their actual proportions in the population. A complete survey methodology is available.
The bottom line here is the earlier you get started saving and the more you are able to chunk back monthly, the better off you’ll be. And let’s hope we can get some individuals elected to the White House and Congress later this year who can help straighten the economy out and maybe work toward finding some way to improve things for upcoming retirees.