This Is How Much Money You Will Need to Retire Comfortably, New Survey Reveals
It's twenty percent more than last year.
Americans are feeling nervous about retirement. U.S. workers now believe they need $1.25 million to have a comfortable retirement—a 20% jump from last year, according to a new survey by Northwestern Mutual. Many Americans don't think they'll be ready to retire, and they're pushing back their expected retirement age.
Likely reasons: Some people's retirement savings have declined in the last year, inflation remains high, and the market is uncertain. The average retirement nest egg has fallen 11% to $86,869, down from $98,800 a year ago, the survey found.
"It's a period of uncertainty for many people, driven largely by rising inflation and volatility in the markets," said Christian Mitchell, executive vice president, and chief customer officer at Northwestern Mutual. "We've also seen upticks in spending year-over-year not only as a result of inflation, but also as people have resumed a sense of normalcy in their lives following the earlier days of the pandemic. These factors are leading many people to recalibrate their thinking about how much they'll need to retire and how long it will take them to get there."
Read on to find out more about what Americans plan to do about retirement and how you can increase your savings now.
Four in 10 people don't believe they will be financially ready when retirement age comes, according to Northwestern Mutual's survey. That aligns with another recent study from Bankrate.com, which found 55% of American workers believe they've fallen behind in their retirement savings.
Workers closest to retirement — those aged 58 to 76 — were most likely to say they feel behind, with 71%, the Bankrate.com survey found. Many wished they'd started saving earlier. "The closer you get to retirement, the more likely you are to say that that is your biggest financial regret," said Greg McBride, chief financial analyst at Bankrate.com.
In the Bankrate.com survey, which was conducted in September, only 25% of workers said they'd increased their retirement savings this year compared to last year, about 34% are contributing the same amount, and 16% are saving less.
The majority of respondents—54%—said they're not contributing more because of inflation. Stagnant or reduced income was cited by 24%; new expenses, 24%; debt repayment, 23%; keeping extra cash on hand, 22%; and market volatility, 18%.
"The labor market might be very strong, but we have found that the pay is not keeping pace with inflation," said Greg McBride, chief financial analyst at Bankrate.com. "Half of workers that got a pay increase said it wasn't enough to keep up with the higher household expenses."
Inflation and volatile markets have taken a toll on the already retired, as well. Only 25% of current retirees are generating enough income to replace $7 out of every $10 in pre-retirement income, the benchmark a comfortable retirement, according to a recent study by Goldman Sachs. About half of retirees are living on less than half their pre-retirement income, the bank found.
Perhaps expectedly, the expected retirement age in the U.S. has risen to 64, up from 62.6 last year. Twenty-five percent of Northwestern Mutual's survey respondents said they plan to retire later than they had anticipated.
While 56% want to continue to work and save money, 45% are concerned about rising healthcare costs and medical expenses. Moreover, 26% are taking care of a relative or friend, and 24% have had to dip into retirement savings.
CNBC offers several tips for workers of all ages to beef up retirement savings. They include "paying yourself first"—automatically putting a portion of each paycheck into a retirement account—using tax-advantaged retirement savings options and taking advantage of employer matching.
"Successful saving is all about the habit," said McBride. "The best way to establish that habit and maintain the habit is to automate your contributions."