Americans are facing a retirement savings crisis, with a new Northwestern Mutual study revealing a stark disparity between what people believe they need for a comfortable retirement and what they actually have saved. The study found that on average, Americans estimate they should save $1.46 million for retirement, a 15% increase from last year and a whopping 53% increase from 2020. However, the reality is that the average amount saved by US adults is only $88,400, down slightly from last year.
Gen Xers, in particular, are feeling the pressure as they approach retirement age. Despite believing they will need $1.56 million to retire comfortably, they have only saved $109,600 on average. This financial anxiety is leading many Gen X workers to dip into their savings or take out loans to cover monthly expenses, with nearly 6 in 10 expecting to postpone retirement due to financial constraints.
The study also highlighted a shift in longevity expectations, with younger generations anticipating longer lifespans than their predecessors. This has led to an increase in retirement savings targets, with millennials and Gen Xers believing they will need $100,000 to $200,000 more than the average American to retire comfortably.
Despite these challenges, the study found that each generation is starting to save for retirement sooner than the one before, with Gen Z leading the pack by starting to save at age 22 on average. However, there is still a concerning lack of awareness and planning when it comes to addressing the possibility of outliving savings, healthcare costs in retirement, and the impact of taxes on retirement income.
Overall, the study underscores the importance of setting individual financial goals, taking action, and seeking professional advice to ensure a secure retirement future. As retirement strategist Kerry Hannon advises, it’s crucial for individuals to focus on their own priorities and take proactive steps to secure their financial well-being.