Americans adjust retirement goals up 15% but savings drop: survey

The amount Americans believe they will need to retire comfortably has increased faster than inflation, but what they are saving has dropped, a recent survey said. 

U.S. adults believe they will need at least $1.46 million to retire in style, according to a Northwestern Mutual survey. This figure is up 15% from the $1.27 million Americans said they needed last year. In 2020, survey respondents thought having $951,000 stashed away would provide a good enough cushion.  

At the same time, the average amount Americans have saved for retirement dropped to $88,400 from $89,300 in 2023, and is more than $10,000 off its five-year peak of $98,800 in 2021.

"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," says Aditi Javeri Gokhale, chief strategy officer, head of institutional investments and president of retail investments at Northwestern Mutual. "Inflation is expanding our expectations for retirement savings, and putting the pressure on to plan and stay disciplined." 

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Gen Zers have bigger retirement goals and will need $1.6 million to retire comfortably, the survey said. Despite the bigger goal, this generation of U.S. adults plan to retire by age 60 because they started saving for retirement earlier. 

While the average American started saving at age 31, Gen Zers began building their retirement nest at age 22—nearly a decade earlier. By comparison, Baby Boomers started building retirement savings a full 15 years after this age and said they expect to work until the age of 72. Millennials and Gen X'ers, who began their savings at ages 27 and 31, respectively, expect to work until 64 and 67.

"These numbers tell a fascinating story about the profound shift in financial planning that has taken shape in America," Javeri Gokhale said in a statement. "Young people today recognize the value of retirement planning and building wealth early on in life and are getting a significant head start over their parents and grandparents."

"At the same time, Gen Z is redefining retirement and signaling that they plan to have long and fulfilling post-career lives," Javeri Gokhale continued. "The good news is that they are investing earlier so they can save the money they need to enjoy it."

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More than 4 million U.S. adults will turn 65 this year. Still, among the generations closest to retirement, only half of Boomers (49%) and Gen Xers (48%) believe they will be financially prepared to retire comfortably, with many expecting that they will likely outlive their savings.

Even more problematic is that while many older Americans across both generations anticipate a retirement shortfall, more than a third (37% and 38%, respectively) have not addressed it. One way older adults can prepare is by minimizing the taxes they pay on their retirement savings, yet only 37% have a plan in place.

"Putting money into a 401K may not be enough to retire comfortably if the financial plan doesn't address the impact of taxes on retirement income," Javeri Gokhale said. "Most people don't realize that their retirement income may be taxed about 20% or 30% when they withdraw and spend it. When they recognize the impact, it's often too late for them to adjust."  

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