The idea of a comfortable retirement just got a lot more expensive, and for some, it may be entirely out of reach. Most retired Americans believe they will need nearly $1.5 million in the bank to retire comfortably, according to a new study.
The majority of retirees surveyed believe that they will need $1.46 million in the bank to retire comfortably, according to Northwestern Mutual’s 2024 Planning & Progress Study. That’s a 15% increase — which far outpaces the 3% to 5% inflation rate — over last year and is up 53% from 2020.
That $1.46 million is in sharp contrast to the average amount that U.S. adults have saved for retirement — a meager $88,400 compared to $89,300 in 2023. Given that 11,000 Americans will turn 65 every day through 2027, only half of Boomers and Gen Xers believe they’ll be financially ready for retirement when the time comes.
Trends based on age and income
Do boomers and Gen Xers have enough saved for retirement?
- Only about half of Boomers (49%) and Gen Xers (48%) believe they will be financially prepared for retirement.
- On average, Gen Xers believe there is a 42% chance they could outlive their savings, while Boomers put the probability at 37%.
- By generation, both Gen Z and Millennials expect to need more than $1.6 million to retire comfortably.
- High-net-worth individuals — those with more than $1 million in investable assets — say they’ll need nearly $4 million.
Is Gen Z saving for retirement earlier than other generations?
On average, American adults say they started saving for retirement at age 31. But Gen Zers say they began at age 22 — nearly a decade earlier, hoping that starting earlier will help them reach their retirement goals sooner. That is also a full 15 years before Boomers, who say they started when they were 37. Millennials and Gen Xers began saving for retirement at ages 27 and 31, respectively.
“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, Northwestern Mutual's chief strategy officer, president of retail investments, and head of institutional investments. “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.”
What generations are most prepared for retirement?
The study also showed that Boomers and Gen Xers don’t have markedly strong confidence in their retirement preparedness.
- Only 49% of Boomers and 40% of Gen Xers know how much money they will need to retire comfortably.
- Only 37% of Boomers and 35% of Gen Xers have a plan for what to do if they outlive their savings.
- Not quite 40% of Boomers and only 42% of Gen Xers have a plan if they can no longer depend on Social Security for income.
- Only 30% of Americans have a plan to minimize the taxes they pay on their retirement savings.
Investing in a future you
Unfortunately, putting money into a 401(k) or another retirement plan may no longer be enough to retire comfortably. This is especially true if you don't take into account the impact of taxes on your retirement income or you begin contributing later in your career.
Enlisting the help of a financial advisor early on in your career is vital to having a happy retirement. After all, retirement is a long game that sooner or later you’ll be forced to play.
