While Americans believe they need $1.46 million to retire comfortably, the average amount that U.S. adults have actually saved for retirement falls far short of this “magic number,” according to a recent study by Northwestern Mutual.
The new study revealed that the average retirement savings have dropped slightly from $89,300 in 2023 to $88,400 today, more than $10,000 off its five-year peak of $98,800 in 2021.
The findings highlight the growing gap between Americans’ retirement goals and their actual savings progress. The “magic number” for retirement has increased by a staggering 53% since 2020, reaching an all-time high of $1.46 million, while the average savings have struggled to keep pace.
“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,” explained Northwestern Mutual chief strategy officer Aditi Javeri Gokhale. “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,” Gokhale added.
The study’s findings underscore the urgent need for Americans to prioritize retirement planning and take proactive steps to boost their savings. As the cost of living continues to rise, individuals must remain committed to their long-term financial goals to ensure a comfortable retirement.
Meanwhile, experts recommend that Americans start gradually increasing the portion of their yearly income that they invest for retirement — with recent retirement research from Vanguard suggesting that workers should aim to save 12% to 15% of their income annually and invest in an age-appropriate asset mix.
“I would much rather have clients that save 15% of their income and get a 5% rate of return than save 1% of their income and get a 15% rate of return,” explained John Roland, a certified financial planner and private wealth advisor at Northwestern Mutual’s Beyond Financial Advisors.
