There’s a worrying gap between what Americans are likely to need for a comfortable retirement and the amount they have in savings, according to a new survey.
On average, people believe they should set aside $1.27 million for retirement. Still, they typically saved just $89,300 — a mere 7 percent of their goal.
The amount Americans need for a comfortable retirement is also increasing from $1.25 million last year, according to a study by Northwestern Mutual. The amount people are saving has also increased, up 3 percent from $86,869 in 2022.
However, according to the results, nearly half of those surveyed — around 48 percent — admitted they didn’t think they had enough money saved for the future they want.
Overall, the average American now believes they must work until age 65 to be ready for retirement, up from 64 last year.
“The magic number of Americans for retirement readiness continues to rise,” said Aditi Javeri Gokhale of Northwestern Mutual.
“The good news is that even during this period of high inflation and market volatility, they are saving and investing more for tomorrow.” This is a step in the right direction and a reversal of what we saw last year when the gap tended to widen as diminished.
“The challenging news is that there continues to be a huge disconnect between what they think they need for retirement and what they have saved so far.”
Last year, the same study found that the average retirement balance fell 11 percent to $86,869 as rising inflation and stock market declines hit 401(k) and IRA retirement accounts.
As this year’s study found, the amount people predict they’ll need to retire comfortably varies slightly by age group and the typical amount they’ve already saved.
People in their 50s estimate they need the most at $1.56 million and have saved an average of $110,900.
Those in their 20s, on the other hand, only believe they’ll need $1.2 million later in life while having only $35,800 in a 401(K) or IRA retirement account.
The comfortable retirement amount drops significantly for the 60’s and 70’s – to $968,000 and $936,000 respectively – mainly because many people in these age groups are already retired.
On average, people in their 60’s have saved $112,500 and those in their 70’s have saved $113,900.
On average, people expect to save $1.27 million for retirement, but the average adult has only $89,300 saved for later life
Fidelity has found that a meager 29 percent of people are on track to cover all of their expenses in retirement, up from 38 percent in 2020.
High-net-worth individuals — those with more than $1 million in investable assets — believe they need $3 million to retire comfortably.
A Schroders 2023 U.S. Retirement Survey released in April found that working Americans ages 45 and older say for the second year in a row they need, on average, about $1,100,000 in savings to retire comfortably go.
While the Northwestern Mutual study found that the average American plans to work until age 65, people who consider themselves disciplined financial planners have reduced their retirement age by two years to 63.
On the other hand, non-planners extended their life expectancy by two years.
“One of the greatest gifts that financial planning brings is time,” Gokhale said. “Planning and discipline can make four years of retirement possible, and professional help is there for everyone, regardless of where they are in their financial journey.”
The results come after a report by Fidelity Investments, America’s largest 401(K) plan provider, revealed America’s retirement crisis.
His research found that less than half of Americans were on track to retire comfortably after the Covid-19 pandemic and blistering inflation took a toll on austerity plans.
Fidelity found that a meager 29 percent of people are on track to cover all of their expenses in retirement, compared to 38 percent in 2020.