Americans have set a new goal for financing a comfortable retirement: $1.26 million. This figure comes from a recent survey by Northwestern Mutual, which polled more than 4,500 U.S. adults aged 18 and older. While $1.26 million may seem unattainable to many, it represents a decrease from last year’s survey, when workers pegged their ideal retirement needs at $1.46 million.
The reduction in financial goals can be attributed to cooling inflation, which has tempered workers’ expectations. “The inflation rate has been falling, and we’re starting to see people’s expectations for retirement savings soften, too,” said Melinda Wilke, a wealth management advisor at Northwestern Mutual. However, inflation is still a concern for retirees.
“Reduced inflation is good news,” said David John, a senior policy advisor at AARP. “But we are still seeing many people concerned about how long their retirement savings will last.”
The fate of the Social Security program, which currently provides monthly payments to more than 70 million Americans, is also a major concern. Despite saving diligently, many Americans fear they might come up short in retirement.
Fifty-one percent of those surveyed said they think it’s somewhat or very likely that they could run out of retirement savings. The survey also highlights generational differences in retirement planning. About 63% of Gen Z believe they will be financially prepared for retirement, compared to 54% of Millennials and 56% of Baby Boomers.
Gen Z is particularly interested in wealth-building trends, such as FinTok, meme stocks, and cryptocurrency. They also started saving earlier, at an average age of 24, to retire by 61.
Retirement savings goal trends
In contrast, Baby Boomers began saving at an average age of 37 with plans to retire at 72. Gen X, or workers between about 45 and 60 years old, are the least confident about their retirement readiness, with only 46% believing they’ll retire in good financial shape. As the first generation to rely heavily on 401(k) plans, they feel underprepared, with about half saying they need a miracle to retire comfortably.
Building a $1.26 million retirement fund is easier if you start young. Workers who start saving at age 20 would need to set aside $330 per month, while those starting at age 30 would need to save $695 per month. David John from AARP offers several tips for those planning their retirement:
– Start saving if you haven’t already. “Any level of savings is better than having no savings at all,” John said. – Wait to retire as long as you can. Delaying retirement can result in higher monthly payments from Social Security.
– Take full advantage of your employer’s match program. “It’s free money, essentially getting your savings to grow rather quickly,” John noted.
– Avoid reacting to market volatility.
Stick to your investment strategy to reap the benefits of long-term growth. Planning for retirement can be complex, but starting early and staying informed can help ensure a financially secure future.
Image Credits: Photo by Joslyn Pickens on Pexels
