According to a new survey, there is a worrying disparity between what Americans expect they will need to retire comfortably and how much they have in savings.
On average, people believe they should set aside $1.27 million for retirement. Yet they typically only saved $89,300, or just 7% of the target amount.
According to a mutual North-West study, the amount Americans expect they’ll need to retire comfortably is also up — up from $1.25 million last year. The amount people are saving has also increased, up 3% from $86,869 in 2022.
However, almost half of those surveyed – around 48% – admitted they didn’t think they had enough money saved for the future they want, according to the results.
Overall, the average American now thinks they will have to work until age 65 to be ready to retire, up from 64 last year.
“Americans’ magic number for retirement readiness continues to rise,” said Aditi Javeri Gokhale of Northwestern Mutual.
“The good news is that they are saving and investing more for tomorrow, even in this time of high inflation and market volatility. It’s a step in the right direction and the reverse of what we’ve seen the year last when the gap widened instead of narrowing.
“The difficult news is that there continues to be a big disparity between what they think they need in retirement and what they have saved to date.”
Last year, the same study found the average retirement balance fell 11% to $86,869 as soaring inflation and a falling stock market hurt 401(k) and IRA retirement accounts. .
According to this year’s study, the amount people expect they will need to comfortably retire varies slightly by age group, as well as the typical amount they have already saved.
People in their 50s expect to need the most — at $1.56 million — and have saved $110,900 on average.
Those in their twenties, meanwhile, only think they will need $1.2 million later in life, while only having $35,800 in a 401(K) or IRA retirement account.
The comfortable retirement amount drops dramatically for people in their 60s and 60s — to $968,000 and $936,000 respectively — largely because many people in those age groups are already retired.
On average, people in their 60s have saved $112,500 and those in their 60s have $113,900.
On average, people expect to save $1.27 million for retirement, but the average adult has only saved $89,300 for later.
Fidelity found that a measly 29% of people are on track to cover all their retirement expenses, up from 38% in 2020.
High net worth individuals, that is, those with more than $1 million in investable assets, estimate that they will need $3 million to retire comfortably.
A Schroders 2023 survey of retirement in the United States released in April found that for the second straight year, American workers aged 45 and older say it will take an average of about $1,100,000 in savings to take a comfortable retreat.
While the Northwestern Mutual study found that the average American plans to work until age 65, people who consider themselves disciplined financial planners have cut their retirement age by two years to 63.
In contrast, non-planners added two years to their working life expectancy.
“One of the greatest gifts financial planning offers is time,” Gokhale said. “Planning and discipline can unlock four years of life in retirement, and professional help is there for everyone, no matter where they are in their financial journey.”
The findings come after a report by Fidelity Investments, the largest US 401(K) plan provider, laid bare the US retirement crisis.
His research found less than half of Americans were on track to retire comfortably after the Covid-19 pandemic and soaring inflation hammered savings plans.
A measly 29% of people are on track to cover all their retirement expenses, Fidelity found, up from 38% in 2020.