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How Much Will Americans Need for Retirement?

Americans face the daunting task of needing $1.46 million for retirement, but most only have $88,400 saved, as worries about Social Security and living expenses go up, cross over the gap between retirement hope and savings becomes uppermost.

 

by Alaguvelan M

Updated Apr 03, 2024

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How Much Will Americans Need for Retirement?

How Much Will Americans Need for Retirement?

A recent survey by Northwestern Mutual found that Americans believe they will need around $1.46 million to retire comfortably. That's a big jump from what they thought just a few years ago. 

People need 53% more than what they thought in 2020. But here's the exposure: most folks only have about $88,400 saved up. That leaves a huge gap of $1.37 million between what they have and what they think they need.

That's a massive gap between dreams and reality. Well, the increase is making everything more expensive, and people are expecting to live longer. There is a worry about Social Security running out of money soon.

Despite knowing they need more, people aren't saving enough. So, while the dream of a relaxing retirement is big, the savings to back it up are still too small.

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What do Americans Believe they Require for Retirement Against their Actual Savings?

There is a big gap between what Americans think they all need for a comfortable retirement and what they have saved up. Let's break it down:

  • Gen Z, the younger generation, believes they'll need around $1.63 million to retire well. They have only saved about $22,800 on average. That's a huge gap of $1.61 million.
  • Millennials aren't doing much better. They think they'll need $1.65 million for retirement, but they've only managed to save around $62,600 on average. That leaves a big gap of $1.59 million.
  • Gen X, the middle-aged group, estimates they'll need $1.56 million, but their savings average only about $108,600. So, they're facing a gap of $1.45 million.
  • Even the Baby Boomers, who are nearing retirement, are falling short. They believe they'll need $990,000, but their average savings are just $120,300. That leaves them with an $870,000 gap.

Even comfortable individuals aren't immune to this trend. They think they'll need a huge $3.93 million for retirement, but their average savings are only $172,100.  Many Americans have some catching up to do when it comes to saving for retirement.

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What are the Variations in Savings Strategies Across Generations?

When it comes to saving money for retirement, different generations have their unique strategies. Let's take a closer look:

  • Gen Z believes in starting early to retire sooner. They begin saving at around 22 years old, which is much earlier than their parents and grandparents did. They're aiming to retire by the time they hit 60, giving them more years to enjoy their golden years.
  • Boomers, on the other hand, started saving later, usually around age 37. They expect to retire around 65, which is the traditional retirement age.
  • Millennials fall somewhere in between. They begin saving at around 27 and plan to retire at a similar age to Boomers, but they feel they need to save more than the average American to retire comfortably.
  • Each generation is becoming more optimistic about living longer. Gen Z and Millennials are particularly hopeful about reaching their 100th birthday, which is influencing their retirement planning.
  • Despite these differences, there's a positive trend: every generation is starting to save for retirement earlier than the one before. This early start gives them a better chance to build up their savings over time.

How Much Will Americans Need for Retirement - FAQs

1. Why do Americans believe they need $1.46 million for retirement?

Americans believe they need $1.46 million for retirement due to increasing life expectancy, rising costs of living, and concerns about the future of Social Security.

2. How much do most Americans have saved for retirement?

Most Americans have only saved around $88,400 for retirement, which is significantly lower than the perceived requirement of $1.46 million.

3. What has caused the gap between retirement savings and perceived needs to widen?

Factors such as inflation, longer life expectancies, and uncertainties surrounding Social Security have contributed to the widening gap between retirement savings and perceived needs.

4. Why are Americans worried about Social Security?

Americans are concerned about Social Security due to projections that its trust fund reserves may be depleted by 2033, potentially leading to cuts in benefits if not addressed.

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