Do YOU have enough in your 401(K)? Americans with $500,000 in retirement savings now need nearly $100,000 more than they did pre-Covid for the SAME quality of life, economist warns

American workers need nearly 20 percent more in their 401(K) to have the same quality of life as before Covid, an economist has warned.

Paul Mueller, a senior research fellow at the American Institute for Economic Research, said rampant inflation was sapping household savings and dashing dreams of a comfortable retirement.

Despite the recent slowdown in annual inflation to 3.7 percent, down from last year’s record 9.1 percent, overall prices remain nearly 20 percent higher than before the pandemic.

“Between November 2020 and now, prices have risen by 17.9 percent if you look at inflation rates,” he told DailyMail.com.

“If you go back to the pre-Covid era, prices are up 18.6 percent. It means that people need almost 20 percent more money to have the same quality of life.

A Bankrate survey last month found that more than half of workers felt “behind” on their retirement savings

‘Someone with a pension pot of €500,000 would need almost €100,000 more today than before the pandemic.’

For someone with $700,000 in savings, they would need an additional $129,500 to make up the shortfall. A worker with just $1 million would need $185,000.

On the other end of the spectrum, someone on $100,000 needs $18,500.

This year, experts have repeatedly sounded the alarm about the American ‘pension crisis’.

According to a report from an investment firm, the average baby boomer has $220,900 in his retirement nest egg Fidelity. This is effectively the same as $180,034 before the pandemic.

And a Bankrate survey last month found that more than half of workers felt “behind” on their retirement savings. About 25 percent said they had not made pension contributions in a year.

This trend is driven by both inflation and higher interest rates, which are putting unprecedented pressure on budgets and limiting workers’ ability to save.

And many even use their later life savings to make their current ends meet. August figures from Bank of America show that the number of people taking “hardship” withdrawals from their 401(K)s rose 36 percent over the past year.

Mueller says there is no magic number for savings and it depends on the cost of living.

According to a study by GOBankingRates, the average annual income needed for comfort in the 50 US states was $68,000

He told DailyMail.com: ‘Households need to think about the quality of life they want. Do you want the same standard of living as now or would you like to spend more after retirement? What is the cost of living in the area where you want to retire?’

This week, the IRS confirmed that savers can add an additional $500 per year to their 401(K)s and other retirement accounts.

These changes, the White House estimates, could help savers increase their returns by between 0.2 percent and 1.2 percent per year — or increase their retirement savings by as much as 20 percent over their lifetime.

And contribution limits for IRAs will also increase from $6,500 to $7,000. Catch-up contributions remain unchanged for IRAs at $1,000.

In 2024, more Americans will also be able to contribute to tax-advantaged Roth IRA accounts. This year, savers can only contribute the full limit if they are single and their income is less than $138,000 or a head of household and $153,000.