Americans say they will need $1.25 million to retire comfortably

At the same time they appear less prepared to meet those goals than they were last year. The amount they have saved for retirement has dropped sharply, their confidence about being prepared for retirement has fallen, and they have little trust that Social Security will be there as a backstop.

In addition, a third of all Americans say they are simply doing little or nothing now toward achieving a comfortable retirement one day.

Survey findings

A new survey conducted by Harris Poll for Northwestern Mutual finds that over the course of just one year:

• The amount people believe they will need to retire comfortably has jumped a strong 20%. The target amount now stands at $1.25 million.

They expect that this amount will come from three sources, each of which will provide roughly a third of their income in retirement. These sources are: A retirement account, such as a 401(k); Social Security; and personal savings or investments.

• At the same time, people are expecting to have to work longer before they will have put aside enough money to retire.

Hopes of retiring early—which gained pace in recent years—are fast fading today, judging by the survey results. Last year the average American expected to be able to retire comfortably at an average age of 62.6. This year the figure has jumped to 64.

About half of those questioned in the poll say the reason for delaying retirement is that they are concerned about rising costs, such as healthcare and unexpected medical costs.

Six in 10 said they want to continue to work so they can save more money for retirement. A quarter said they have had to dip into their retirement savings and so need to build them up again.

• A growing number of people believe there is a good chance they will outlive their savings in retirement.

Almost a half of all respondents to the poll said they do not expect to be ready financially for retirement.

Those who are taking steps to avoid the possibility that they will outlive their savings are increasing the amounts that they have saved; putting together a financial plan; buying investments; discussing their options with their family; and seeking advice from a financial planner.

A third of all respondents expect to live to 100.

Uncertain times

These are times of uncertainty for many, explains Christian Mitchell, executive vice president and chief customer officer at Northwestern Mutual.

The changes are being driven largely by volatile stock markets and rising inflation, he says.

In addition people also have returned to the way in which they lived before the pandemic. They have tended to resume a feeling of normalcy in their lives, he adds. As a result, many people are reassessing how much they will need to retire as well as how long it will take for them to achieve that goal, Mitchell says.

Not doing well

When it comes to reaching that goal, however, Americans are not faring well. Their retirement savings remain low and most appear to be taking few steps to boost them.

The average amount of savings that the average American has set aside for retirement has actually fallen by 11%—from last year’s $98,800 to $86,869 today.

Not only that, but the study by Northwestern Mutual finds that Americans are taking few steps to prepare to survive comfortably in retirement.

So much so that fully a third said they have taken no steps to meet this concern.

In addition, almost half the respondents say they can imagine a time when Social Security no longer exists.

Gain clarity

The question on many people’s minds, Mitchell says, is: How long should I expect to work so that I can save enough for me to retire comfortably?

The question is a difficult one to answer, he adds, because so many considerations need to be factored in.

The problem, however, is that too many people grapple with the question in a bubble, he adds.

He advises people to get clear in their minds such aspects as how much they have saved and what they need to save for retirement.

Once they have gained greater clarity on these questions, they can be more confident and obtain professional advice that will provide them with clearer answers, Mitchell says.

From that, they can develop a plan that will help them to achieve a goal of living comfortably in retirement.