An analysis by Northwestern Mutual found that American adults said they now need to save 53% more to retire than in 2020 (before President Joe Biden took office). The figure increased from $951,000 (2020) to $1.46 million today.
The data also shows an increase of 15% compared to last year, when the target retirement savings figure was $1.27 million. Northwestern Mutual Retail Investments President Aditi Javeri Gokhale stated:
In 2023, the soaring cost of eggs in the grocery store symbolized inflation in America. In 2024, it's nest eggs ... 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. Inflation is expanding our expectations for retirement savings, and putting the pressure on to plan and stay disciplined.
Retirement savings fall
The Northwestern Mutual study also warned of a wide gap between the amount of money Americans think they need for retirement and what they actually save. The average figure fell from $89,300 in 2023 to $88,400 in 2024. In addition, Gokhale explained that money put into retirement savings can also be affected by taxes:
Most people don't realize that their retirement income may be taxed about 20% or 30% when they withdraw and spend it. When they recognize the impact, it's often too late for them to adjust.
Average age Americans begin to save for retirement
The report found that 31 is the average age at which Americans begin saving for retirement. However, Generation Z is ahead of the curve by starting to save at age 22, with the goal of retiring at age 60.
Baby Boomers were the generation that took the longest to save for retirement (on average at age 37), so they say they plan to work until age 72. Generation X and Millennials project to finish working between the ages of 64 and 67. According to Javeri Gokhale.
These numbers tell a fascinating story about the profound shift in financial planning that has taken shape in America. ... Young people today recognize the value of retirement planning and building wealth early on in life and are getting a significant head start over their parents and grandparents. At the same time, Gen Z is redefining retirement and signaling that they plan to have long and fulfilling post-career lives. The good news is that they are investing earlier so they can save the money they need to enjoy it.
