Americans believe they will need $1.27 million to retire comfortably, according to the latest set of findings from Northwestern Mutual’s 2023 Planning & Progress Study. That number continues to increase, up from $1.25 million reported last year. High-net-worth individuals – those with more than $1 million in investable assets – believe they’ll need $3 million to retire comfortably.
Consider working with a financial advisor as you plan your retirement.
Most workers have got a ways to go with their savings, the report finds. On average, Americans have set aside $89,300 of the $1.27 million they think they’ll need. That average ranges from slightly less than $36,000 in retirement savings for those in their 20s, to nearly $114,000 for people in their 70s – leaving them far off from their required savings goals.
A Positive Development
However, even in the face of a 20% loss in stocks during 2022 and soaring inflation, workers still managed to increase the average retirement savings balance by 3% from the 2022 average of $86,869.
“”The good news is that they are saving and investing more for tomorrow, even in this time of high inflation and market volatility,”” said Aditi Javeri Gokhale, chief strategy officer, president of retail investments and head of institutional investments at Northwestern Mutual. “That is a step in the right direction and a reverse of what we saw last year when the gap widened rather than narrowed. The challenging news is that there continues to be a big disparity between what they think they’ll need to retire and what they’ve saved to date.””
The study found that people in their 20s had saved an average of $35,800 for retirement. To hit the $1.27 million goal, someone 25 years old with that starting balance would need to invest about $306 per month for the next 40 years at an annual return of 7%. Someone 35, with the average current balance of $67,400 would need to save about $668 a month for the 30 years until they near retirement.
A 45-year-old with the average $77,400 in savings, with just 20 years to save, requires monthly savings of $1,973 per month. At 55, with a current retirement asset balance of $110,900 and 10 years until they near retirement, a worker would need to sock away the unlikely total of $6,344 per month.
Expectations as Retirement Nears
On average, the study found that 52% of people say they expect to be financially prepared for retirement when the time comes, with Gen Z coming in the most optimistic, at 65%. Gen Xers are the least optimistic, with just 45% saying they expect to be ready. Millennials are right in the middle at 54%, while 52% of Baby Boomers who have yet to retire think they’ll be financially set to retire.
The study also found that, on average, Americans expect to work a bit longer before they can call it quits than they did in previous surveys. Currently, they expect to work until age 65, up from 64 last year and 62.6 in 2021. The full retirement age for Social Security benefits is 67 years old for anyone born in or after 1960.
When it comes to feeling ready for retirement, the study found that creating a well thought-out financial plan brought a real boost of confidence. Survey respondents who described themselves as disciplined financial planners knocked two years off their retirement age, expecting to quit at 63, while people who described their planning as informal or having no plan figured they’d be retiring at age 67.
Finding the answer to the question, “What’s your number?” is an essential piece of financial planning, so that investors can understand the amount of appropriate risk necessary to meet their investment and retirement goals. Typically, experts recommend saving 10% or 15% of salary for the bulk of your working years. Workers also can consult their own Social Security estimate to get a full picture of their potential retirement income.
Tips on Retirement
- While many investors obsess about trying to “beat the market,” smart investors understand that they simply need to meet their own periodic goals to “make their number” – their desired total retirement assets before they leave work. One way to get help figuring out your number is to work with a financial advisor who can help you answer all your questions about retirement options. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have free introductory calls with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Fidelity recommends that you have 10 times your annual income saved for retirement by age 67. To find out if you’re on track, try SmartAsset’s retirement calculator. This free tool will estimate how much you’ll have when the time comes to retire.
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