Discrepancy between Americans’ Retirement Savings Goals and Reality

Discrepancy between Americans’ Retirement Savings Goals and Reality

There’s a huge gulf between what Americans say they need in retirement and what they actually have saved, regardless of their age.

On average, Americans believe they should save $1.46 million for a comfortable retirement, revealed a Northwestern Mutual study published this week. That’s a 15% increase from last year and a sharp 53% increase from what Americans reported in 2020.

The problem is that the average amount American adults have saved for retirement is $88,400, down slightly from last year and more than $10,000 off since 2021.

“Many Americans believe the cost of a comfortable retirement will be higher than ever. » Jean Roland, partner and private wealth advisor at Northwestern Mutual’s Beyond Financial Advisors, told Yahoo Finance. “Their ‘magic number’ for retirement savings is at an all-time high. »

The fear of Generation X

Discrepancy between Americans’ Retirement Savings Goals and Reality

Americans estimate they should save $1.46 million for a comfortable retirement, according to a new study from Northwestern Mutual. (Getty Creative) (Steven Errico via Getty Images)

Only about 40% of Gen Xers feel like they know how much money they’ll need to retire comfortably. It is worth noting that the oldest in this cohort will be 60 next year.

“They see their retirement years looming on the horizon, but their uncertainty about the future creates great financial anxiety,” Roland said.

Generation X – those born between 1965 and 1980 – say they will need an average of $1.56 million in savings to retire comfortably, but as of today, they only have $109,600. Gen Z and millennials expect to need more than $1.6 million to retire comfortably, but currently have $22,800 and $62,600 saved, respectively.

More than one in three Gen X workers have dipped into their savings or taken out a loan to pay their monthly bills, according to a recent study. MetLife Study. Nearly 6 in 10 Gen

“Generation X employees, the next to retire, are struggling to meet their financial goals,” Todd Katz, MetLife benefits manager, told Yahoo Finance. “A lack of awareness and understanding could disadvantage this cohort. »

Learn more: How much money should I have saved by 50?

Longevity changes the calculus

One reason overall retirement savings forecasts have jumped this year is because younger generations expect to live longer — both in general and in retirement — as well as older generations, Roland said.

According to the report, three in ten millennials and Gen Zers say it is likely or very likely that they will live to be 100. The older crew isn’t so sure. Among Generation X and baby boomers, only 2 in 10 expect to become centenarians.

Better yet, the study found that each generation starts saving for retirement earlier than the last, Roland said. “The average age for Americans to start saving for retirement is 31. But Gen Z is getting a significant head start.”

Gen Z said they started saving for retirement at age 22 on average and planned to retire at age 60, according to Northwestern Mutual. That’s 15 years ahead of baby boomers who say they started saving at age 37 and expect to work until age 72.

“Millennials and Generation X, for example, believe they will need $100,000 to $200,000 more than the average American to retire comfortably,” Roland said. “This is a big deal. As longevity continues to increase, it is essential that people look at the challenges that a longer life can create and factor them into a financial plan.

Inertia rules

Across generations, more than a third have taken no action to consider the possibility of outliving their savings, as develop a financial plan or get advice from a financial advisor, according to data from Northwestern Mutual.

Learn more: Retirement Planning: A Step-by-Step Guide

For example, about half of Americans don’t have a plan to address Health care costs retired, which can easily exceed six figures.

An elderly man meets with his doctor to discuss his health problems.  He is dressed casually and sitting in front of the doctor as she shares some recent test results with him on a tablet.An elderly man meets with his doctor to discuss his health problems.  He is dressed casually and sitting in front of the doctor as she shares some recent test results with him on a tablet.

And since it is tax timeIt is worth mentioning that only about half of people aged 43 and over have a good understanding of how taxes or potential stock market declines could have an impact on their retirement income.

“Most people don’t realize that their retirement income can be taxed at about 20 or 30 percent when they withdraw and spend it,” according to Aditi Javeri Gokhale, chief strategy officer at Northwestern Mutual. “When they recognize the impact, it is often too late to adapt. »

It’s important to keep generational trends in perspective.

“While it is interesting and informative to hear what others might need to retire comfortably, people should remember that their long-term goals and aspirations – as well as their individual financial situations – may differ considerably from someone else’s,” Roland said. His main advice: focus on what’s important to you, set your own goals and take action.

Kerry Hannon is a senior columnist at Yahoo Finance. She is a career and retirement strategist and author of 14 books, including “In control at 50 and over: how to succeed in the new world of work » and “Never too old to get rich.” Follow her on @kerryhannon.

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