The ideal retirement savings target for a comfortable post-work life has dropped to $1.26 million, according to a new survey by Northwestern Mutual released on April 14. Although that figure is down by $200,000 from last year, it remains far above the actual savings levels of most Americans.
The decrease in the retirement savings target is attributed to easing inflation. The $1.26 million figure is now roughly in line with levels seen in 2022 and 2023, based on responses collected before the recent increase in stock market volatility.
John Roberts, Chief Field Officer at Northwestern Mutual, said, “Many people are still concerned about inflation, but expectations for retirement savings have moderated as inflation has slowed.”
Few are meeting the benchmark
Despite the lower retirement savings target, most Americans are still falling short. Northwestern Mutual recommends saving enough to replace 80% of pre-retirement income annually. However, only 9% of survey respondents had saved more than ten times their annual income—a level generally considered well-prepared.
With the average household income estimated at around $80,000, meeting the retirement savings target would require saving nearly 15 times that amount.
The survey found that 51% of respondents believe they may outlive their retirement savings, yet 35% said they have made no preparations for that possibility. Only 16% were confident they would not exhaust their assets before death.
Gen X faces mounting pressure
A quarter of Americans with retirement accounts have saved less than one year’s worth of income. As life expectancy continues to rise, retirement preparation remains insufficient, especially among those nearing retirement age. Experts anticipate that more than 10,000 Americans will reach age 65 every day through 2027, marking what they call the “Peak 65” period. Meanwhile, healthcare costs are rising, with Fidelity Investments estimating that a person retiring at age 65 in 2023 will need an average of $165,000 for medical expenses alone.
On average, people start saving for retirement at age 31 and aim to retire at 65, according to the Northwestern Mutual survey. Younger generations are starting earlier and planning to retire sooner to meet the retirement savings target more effectively.
Gen Z leads in early planning
Generation Z (born 1997–2012) began saving at an average age of 24, with plans to retire at 61. 34% of Gen Z respondents believe they could live to 100. In contrast, baby boomers (born 1946–1964) started saving at 37 and targeted retirement at 72, with only 23% expecting to live to 100.
Xers most at risk
The generation under the most financial pressure is Generation X (born 1965–1980), the first to shoulder retirement savings without widespread pension support. 52% of Gen X respondents reported having saved less than three times their annual income, and 54% do not expect to have enough savings by retirement. These figures exceed the concerns expressed by 37% of Gen Z and 46% of millennials.
Only 6% of Gen Xers had saved over ten times their annual income. 48% plan to continue working after retirement age, with 56% citing financial necessity. This is notably higher than the 40% national average.
Roberts warned, “Gen X is running out of time. They’re not where they should be. It’s time for this generation to take action.”
Optimism among younger savers
By contrast, Roberts praised Gen Z, saying they are “starting earlier, investing more, and exploring diverse wealth-building strategies,” and added that “they’re more optimistic and charting new paths compared to older generations.”
Inflation and Social Security are top concerns
The most pressing concerns for future retirees were the stability of Social Security and post-retirement inflation. 33% of respondents expressed doubt that Social Security benefits will last until they retire, while 30% identified rising inflation in retirement as a major concern.
For most Americans, the $1.26 million retirement savings target remains out of reach—but its importance is growing as longevity increases and traditional pensions disappear.
BY YUHOE AN, CONTRIBUTING WRITER
