There’s a worrying difference between what Americans expect they’ll need to retire comfortably and the amount they have in savings, a new study finds.
On average, people think they need to set aside $1.27 million for retirement. Still, they typically only saved $89,300 — just 7 percent of the target amount.
That reports a Northwestern Mutual study, the amount Americans predict they will need to comfortably retire is also rising — slightly up from $1.25 million last year. The amount people are saving has also increased, up 3 percent from $86,869 in 2022.
However, nearly half of those surveyed — some 48 percent — admitted they didn’t think they’d have enough money saved for the future they want, according to the findings.
In general, the average American now believes they will have to work until age 65 to be ready for retirement, up from 64 last year.
“Americans’ magic number for retirement readiness continues to rise,” said Aditi Javeri Gokhale of Northwestern Mutual.
The good news is that they are saving and investing more for tomorrow, even in these times of high inflation and market volatility. That is a step in the right direction and the reverse of what we saw last year when the gap widened rather than narrowed.
“The challenging news is that there is still a big difference between what they think they need to retire and what they have saved so far.”
Last year, the same study found that the average retirement balance fell 11 percent to $86,869 as rising inflation and stock market declines undercut 401(k) and IRA retirement accounts.
The amount people predict they’ll need to comfortably retire varies slightly by age group, this year’s study found, as does the typical figure they’ve already saved.
People in their 50s expect to need the most — $1.56 million — and have saved an average of $110,900.
Meanwhile, twenty-somethings only think they’ll need $1.2 million later in life, when they only have $35,800 in a 401(K) or IRA retirement account.
The comfortable retirement amount drops significantly for those in their 60s and 70s — to $968,000 and $936,000, respectively — largely because many people in these age groups are already retired.
On average, those over 60 have saved $112,500 and those over 70 have saved $113,900.
On average, people expect to save $1.27 million for retirement, but the average adult has only $89,300 saved for later
Fidelity found that a measly 29 percent of people are on track to cover all their expenses when they retire, up from 38 percent in 2020.
Wealthy individuals—those with more than $1 million in investable assets—think they will need $3 million to retire comfortably.
A 2023 Schroders U.S. Retirement Survey released in April found that for the second year in a row, working Americans age 45 and older say they need an average of about $1,100,000 in savings to comfortably retire.
While the Northwestern Mutual study found that the average American plans to work until age 65, people who consider themselves disciplined financial planners have lowered their retirement age by two years to 63.
On the other hand, non-planners added two years to their life expectancy.
“One of the greatest gifts financial planning offers is time,” said Gokhale. “Planning and discipline can unlock four years of life after retirement, and professional help is out there for everyone no matter where they are in their financial journey.”
The findings come after a report from Fidelity Investments, America’s largest 401(K) plan provider, exposed the US pension crisis.
The survey found that less than half of Americans were on track to retire comfortably after the Covid-19 pandemic and red-hot inflation spiked savings plans.
A measly 29 percent of people are on track to cover all their expenses in retirement, Fidelity found, up from 38 percent in 2020.