If you're aiming to retire soon, it may be time to increase those savings, as a new study shows that Americans believe they need $1.46 million for a comfortable retirement.
But that number is if you want to retire today, younger folks like Gen Z and millennials are eyeing even higher figures, around $1.6 million. With the oldest millennials being in their early 40s today, the clock's ticking to stash away that cash.
More importantly, the study by Northwestern Mutual's 2024 Planning & Progress, shows that this year, a record number of Americans — 4 million — will reach retirement age. However, only half of those retiring feel financially ready. Both boomers and Gen Xers are concerned about outliving their savings, with Gen Xers at 42% and boomers at 37%. Shockingly, over a third of both groups (37% and 38%, respectively) haven't taken any steps to address this risk, the study notes.
The study says that the average amount older Americans have saved for retirement today is about $88,400, which is nowhere near that $1.4 million mark needed.
"In 2023, the soaring cost of eggs in the grocery store symbolized inflation in America. In 2024, it's nest eggs," said Aditi Javeri Gokhale, head of institutional investments at Northwestern Mutual, in a press release. "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."
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Instead of putting down their tools or laptops at age 65, many retirees are returning to work, and inflation is only one reason.
But there is some good news for future generations: sorry boomers, but it turns out Gen Zers have prioritized their retirement a lot more than the older gens, as the study notes they are the ones saving the most at an earlier age.
The study found that most Gen Zers want to retire by age 60, so they start saving at 22 years old on average. In contrast, boomers say they are willing to work until they're 72 and began saving at 37, while millennials and Gen Xers started at 27 and 31, thinking they'd retire at 64 and 67, respectively.
But if these numbers scare you, you're not alone. Last year, when the same annual study popped up, the AARP asked the experts, and they believe that while this number does make sense considering the state of the economy, it's important to keep in mind that a lot of factors come into play when retiring, such as where you want to spend your time and how you want to spend your money.
“Retirement as a pure number, I think there is a fallacy at looking at it in that fashion,” Danny Lee, a wealth adviser with Northwestern Mutual told the AARP. “Ultimately, there is a calculation. When you say $1 million, I don’t think it’s accurate for a lot of people. Instead, look at such factors as, am I going into retirement as an individual? As a married couple? Are there inheritances I can depend on? Is anyone relying on me?”
Additionally, experts told the AARP that location is also a huge factor, as someone retiring in San Francisco, for example, would need a much larger budget than someone retiring in a smaller city or town.
Regardless of the age you are today, one thing is certain: It's time to start stuffing that piggy bank!
