People Think They Need $1.46 Million to Retire—They're Not Saving Enough To Get There

KEY TAKEAWAYS

• Adults in the U.S. believe they will need an average of $1.46 million to retire comfortably, a number trending considerably higher than the current inflation rate, according to findings from Northwestern Mutual’s 2024 Planning & Progress Study.
• With average retirement savings of $88,400, the gap between what people think they'll need for retirement and what they've saved is large.
• About 68% of private industry workers have access to 401(k) options, but only 51% take advantage of them, according to the U.S. Bureau of Labor Statistics.

Adults in the U.S. predict they'll need far more money to retire than they currently have, and their predictions are growing far faster than inflation.

Adults in the U.S. believe they will need an average of $1.46 million to retire comfortably, according to findings from Northwestern Mutual’s 2024 Planning & Progress Study. The amount of money people think they'll need is up 15% from last year, nearly five times the price increases over the same period.

Actual Retirement Savings Lag Behind

Unfortunately, Americans' actual retirement savings aren’t up to par. The average is $88,400, more than $10,000 off its five-year peak of $98,800 in 2021, according to the study. Across all segments, the gap between what people think they'll need for retirement and what they've saved is large.

"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," said Aditi Javeri Gokhale, chief strategy officer, president of retail investments, and head of institutional investments at Northwestern Mutual. "Inflation is expanding our expectations for retirement savings, and putting the pressure on to plan and stay disciplined,"

Roadblocks to Adequate Savings

While inflation is making retirement look increasingly expensive, Americans are also missing out on traditional methods of creating a retirement nest egg.

Pension plans, a common benefit up until the 1980s, are nearly non-existent today. And while Social Security provides about 90% of the income for more than a quarter of older Americans, the trust fund is facing a 75-year deficit and is expected to be depleted by the mid-2030s.

While 68% of private industry workers have access to 401(k) options, only 51% take advantage of them, according to the U.S. Bureau of Labor Statistics. Of that number, many are cashing out to cover necessary living expenses. According to Fidelity, in the third quarter of 2023, 2.3% of workers took a hardship withdrawal from their 401(k) savings, up from 1.8% the same quarter the year prior.