How Much Do Americans Think They Need To Retire Comfortably?

Between inflation, stock market volatility, and mounting credit card debt (the United States hit a record-breaking $1.13 trillion in credit card debt in late 2023), the idea of saving for retirement might feel like a problem for another day. In fact, according to a September 2023 Bankrate survey, 22% of Americans reported that they hadn't contributed to their retirement savings in the year prior. Mark Hamrick, a Bankrate senior economic analyst, said, "Amid the tumultuous developments of the past several years, including a short but severe recession and a period of high and sustained inflation, a majority of Americans say they're not where they need to be to achieve their retirement savings goals." This not only adds additional financial stress to those who feel like they aren't making progress, but it can be especially harmful for those nearing retirement age.

While retirement savings anxiety increases, so, too, does the amount of savings most Americans believe that they will actually need to live comfortably during retirement, also known as the "magic number." According to Northwestern Mutual's 2024 Planning & Progress Study, U.S. adults now believe they'll need $1.46 million to retire comfortably. This not only represents a 15% increase over the 2023 amount ($1.27 million) but also far and away outpaces the current rate of inflation, which, as of February 2024, was 3.2%. Even more troubling is the fact that the 2024 magic number is an astonishing 53% jump from the pre-pandemic 2020 magic number of $951,000.

How much have people saved?

Despite the massive jump in the monetary amount people think they'll need to retire comfortably, there hasn't exactly been a corresponding jump in most people's retirement savings. In fact, the gap has only grown between what people think they'll need and what they actually have saved. (See Money Analysis's article on when you should really start saving for retirement.)

Per Northwestern Mutual's survey, the average amount (across all generations) that Americans have saved for retirement is just $88,400. This amount was slightly higher for baby boomers, who have an average of $120,300 saved for retirement, but still nowhere near the magic number of $1.46 million that people anticipate needing. This leaves Americans with a $1.37-million gap between what they have and what they predict needing.

Another troubling fact about the gap between existing savings (which doesn't include money saved in an emergency fund) and anticipated retirement amounts is that it shows an overall decline in just how much Americans have actually saved for retirement in the last several years. Americans had, on average, saved $98,800 in 2021, but subsequent years have led to steady declines. This is due in large part to increased prices and the subsequent drop in the personal savings rate. Americans saved just 3.6% of their disposable income in February 2024, the lowest rate since the housing crisis in 2008. The increase in expenditures across everything from cars to housing to groceries has forced more and more Americans to pinch their budgets. As more Americans are relying on savings to stay financially above water, it's natural that any income going into savings would decline significantly.

The silver tsunami has arrived

Another element of the current retirement savings situation is the impact that the "silver tsunami" or the baby boomer generation, might have on overall retirement ages. As this generation, born between 1946 to 1964, continues to approach retirement, it adds additional anxiety for those who might not feel financially ready. Northwestern Mutual found in its survey that just 49% of surveyed boomers believed they would be financially prepared when the time came to retire. This is especially true for this generation, considering post-pandemic inflation and the faster-growing magic number that has likely outpaced any potential savings baby boomers might have made.

It's estimated that more than 11,200 Americans will turn 65 every single day through 2027 (or, over 4.1 million people a year). 2024, in particular, is considered "peak 65," meaning more Americans will turn 65 in 2024 than in any other year recorded. While 65 has traditionally been seen as the typical age of retirement, that's increasingly becoming untrue. This age group is also largely without pension plans that protected previous generations when it came to retirement income.

As Jason Fichtner, executive director at the Alliance for Lifetime Retirement Income Institute, explained in a press release for the institute's 2024 Peak 65® economic report, "Unlike older retired Baby Boomers, the majority of Peak 65'ers don't have pensions, which used to help fill that gap left by Social Security." This has added an additional level of uncertainty about what the new retirement age might be. The Social Security Administration even moved the retirement age for full benefits to 67 for anyone born in 1960 or later and experts are confident that more age increases are coming.

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