Current:Home > Contact-usHere's how much Americans say they need to retire — and it's 53% higher than four years ago-LoTradeCoin
Here's how much Americans say they need to retire — and it's 53% higher than four years ago
View Date:2024-12-23 20:57:21
Americans have lofty goals for their retirement, with the typical worker believing they need $1.46 million to retire comfortably — a jump of 53% from their savings target in 2020, according to a new survey from Northwestern Mutual.
But most people are far from reaching that objective, with the study finding that the average amount held in a retirement account today is just $88,400. That means that the typical worker has a $1.37 million gap between their actual savings and their retirement aspirations.
Due to the impact of inflation and other financial pressures, Americans today believe they need to sock away more for their golden years compared with 2020, when the typical worker pegged a comfy retirement as requiring $951,000 in savings, Aditi Javeri Gokhale, chief strategy officer at Northwestern Mutual, told CBS MoneyWatch.
But, she added, many workers are also expecting to live longer and spend more time in retirement, which may also explain why people believe they need bigger nest eggs than in prior years. Indeed, Gen Z workers, who are currently in their early 20s, want to retire at 60, and almost 1 in 3 think they'll live to 100, meaning that they'll need to fund a 40-year retirement, the study found.
"The magic number is at an all-time high — it's 50% higher than what it was before the pandemic," Gokhale said. "The cost of living in general, whether in reality or perception, seems to be more costly now than it was before."
And more people are worried about Social Security, given that the program's trust fund reserves are set to be depleted in 2033, which will lead to a cut in benefits if the program isn't shored up before then.
"We're all seeing stories about Social Security, and you'll see more of that since it's election year," she noted. "So if my benefit will be cut, I have to shoulder more of the burden."
How far does $1.46 million get you?
Many of the 4,588 adults who responded to the financial service company's survey likely answered with a guesstimate, given that the study also found that only about half of boomers — many of whom are already retired — say they actually know how much they need to retire, Gokhale said.
In other words, while some people have talked with a financial adviser or worked out a detailed plan themselves for their retirement, many Americans are heading toward retirement without really sitting down and figuring out what they need.
"There is no major calculation; it's a feeling," Gokhale noted. "Some of them probably have done some math, in terms of saving and in terms of average burn to operate [in retirement], but it generally comes [down] to feeling."
To be sure, retirement needs vary considerably, based on a person's standard of living while working, their local cost of living, taxes and other financial details. Using the rule of thumb to withdraw 4% of one's retirement savings annually, a nest egg of $1.46 million would result in about $58,400 in annual income.
After adding in Social Security benefits, which is about $23,000 annually, that results in retirement income of about $81,000 each year — or above the median household income of $74,580.
Of course, most Americans are far from reaching $1.46 million in savings — and many head into retirement with no savings at all.
A do-it-yourself system
The study underscores the do-it-yourself mentality of the current retirement system, which some experts have said has evolved from the shift to 401(k) programs from pensions, with the latter managed by companies to provide workers with a steady stream of income in retirement.
But with 401(k) programs, workers typically pick their own investments and decide how much of their income to save.
One of the system's critics is retirement expert Teresa Ghilarducci, an economist and professor at the The New School for Social Research in New York, who recently told CBS News that the current approach has left behind the bottom 90% of workers. For starters, only half of American workers even have access to a retirement plan, leaving the rest to cobble together a savings strategy.
Many Americans don't believe they have enough money to consult a financial adviser, but it's a step that she believes more people should take, noted Gokhale, whose company provides that service. "I don't believe you have to be on your own and Google search, 'What do I need for retirement'," she added.
But other research indicates there are plenty of hurdles to overcome. For one, about 6 in 10 people over 50 have never talked with a financial professional, and the reasons range from their fears that they don't have enough in savings to justify it and that it's too expensive, according to a study published earlier this year from AARP.
"If you are trying to do this on your own, it becomes very very overwhelming and disheartening," Gokhale said.
For most Americans, going it alone is the standard way to plan for retirement.
Aimee PicchiAimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.
TwitterveryGood! (9464)
Related
- Why Jersey Shore's Jenni JWoww Farley May Not Marry Her Fiancé Zack Clayton
- A Guide to Hailey Bieber's Complicated Family Tree
- Jack Teixeira, alleged Pentagon leaker, to plead guilty
- Musk’s X asks judge to penalize nonprofit researchers tracking rise of hate speech on platform
- Manhattan rooftop fire sends plumes of dark smoke into skyline
- Caitlin Clark declares for the 2024 WNBA draft, will leave Iowa at end of season
- Los Angeles Dodgers' Shohei Ohtani Reveals He Privately Got Married
- Emotional video shows 3-year-old crying for home burned to nothing but ash in Texas Panhandle wildfires
- U.S.-Mexico water agreement might bring relief to parched South Texas
- Rhys Hoskins – Brewers' new slugger – never got Philly goodbye after 'heartbreaking' injury
Ranking
- Philadelphia mass transit users face fare hikes of more than 20% and possible service cuts
- Federal judge blocks Texas' SB4 immigration law that would criminalize migrant crossings
- AP Week in Pictures: Global
- Republicans criticize California’s new fast food law that appears to benefit a Newsom campaign donor
- Taylor Swift drops Christmas merchandise collection, including for 'Tortured Poets' era
- Research suggests COVID-19 affects brain age and IQ score
- Dodgers superstar Shohei Ohtani announces he is married
- Caitlin Clark declares for the 2024 WNBA draft, will leave Iowa at end of season
Recommendation
-
Sydney Sweeney Slams Women Empowerment in the Industry as Being Fake
-
Judge blocks Texas law that gives police broad powers to arrest migrants who illegally enter US
-
College basketball bubble watch: Pac-12 racing for more than two NCAA tournament teams
-
I Tried 63 Highlighters Looking for a Natural Glow— Here Are the 9 Best Glitter-Free Highlighters
-
World leaders aim to shape Earth's future at COP29 climate change summit
-
Kool-Aid McKinstry, Alabama star DB, has Jones fracture, won't work out at NFL combine, per report
-
Hacking at UnitedHealth unit cripples a swath of the U.S. health system: What to know
-
Montana judge declares 3 laws restricting abortion unconstitutional