After a bruising two years, Americans are rethinking how long they’ll need to work and how much money they’ll need to retire comfortably.
Adults in the U.S. Say they’ll need $1.27 million to retire comfortably, up from the $1.25 million last year, according to Northwestern Mutual’s 2023 Planning & Progress study, which surveyed 2,740 people over 18. The age they plan to work until has also ticked up, to 65 from 64 last year and 62.6 in 2021.
Blame inflation, high interest rates, and recession fears for the pessimism.
“A bag of groceries is $100 now,” says Aditi Javeri Gokhale, Northwestern Mutual’s chief strategy officer. “On a day-to-day basis, they are coming up with, okay, this is how my life is today. Ten, 20, 50 years from now I need to save much more to afford the lifestyle I have right now.”
That’s in line with other reports, which have found that inflation and market volatility have rocked how much many money people believe they need to retire comfortably and retain the same lifestyle they have now, at a minimum.
It explains trends like “unretirement,” in which older workers re-enter the workforce for a variety of reasons after the economy hit their retirement savings hard. In fact, baby boomers say they’ll need to work the longest to afford retirement in the Northwestern Mutual report, with the average respondent saying they plan to work until age 71.
Those in their fifties—termed Generation anXious by the report, a play on “Gen X”—say they’ll need the most saved in order to retire comfortably, at $1.56 million on average. They also expressed the most worry of any generation about having enough for retirement. Javeri Gokhale says that makes sense, considering this is the so-called sandwich generation, with many caring for children and older relatives while worrying about their own retirement, which is right around the corner.
Call it youthful optimism, but Gen Z plans to retire more than a decade sooner than boomers, at 60. And 40% of them also said they are expecting to live to age 100, the most of any age group.
While Javeri Gokhale appreciates the positive outlook, she also notes that’s a long time to not work. “How are they going to make sure they have enough for the 40 years between 60 and 100?” She asks. Gen Z has yet to experience a true, prolonged economic downturn in their adult life, she says, and that could change their outlook in the coming years. That said, Gen Z does seem to be saving more and earlier than other generations did at the same age.
Not even high-net-worth individuals, defined by Northwestern Mutual as those with at least $1 million in investable assets, are exempt from rethinking their retirement strategy. They now believe they’ll need at least $3 million to live comfortably in retirement.
The good news from Northwestern Mutual’s report is that while many Americans believe they need more to retire, they also have more socked away compared to years past. U.S. Adults have $89,300 saved for retirement, on average, compared to $86,869 in 2022, a 3% increase.
“The challenging news is that there continues to be a big disparity between what they think they’ll need to retire and what they’ve saved to date,” says Javeri Gokhale.