The “magic number” for a comfortable retirement in 2025 is $1.26 million, according to a new survey by Northwestern Mutual. The survey polled more than 4,500 U.S. adults aged 18 and older. This figure represents a decrease from last year’s survey, which found that workers believed they needed $1.46 million for retirement.
Researchers at Northwestern Mutual attribute this change to cooling inflation, which has tempered workers’ expectations for their retirement needs. Despite the lower “magic number,” many Americans remain concerned about the longevity of their savings. David John, a senior policy advisor at AARP, said, “We are still seeing many people who are very concerned that prices are going to continue to go up, and what that means for how long their retirement savings will last.
The survey also found that Americans had median retirement savings of $87,000, according to the most recent data available.
Generational differences were apparent, with 63% of Gen Z believing they will be financially prepared for retirement, compared to 54% of millennials and 56% of baby boomers. Gen X was the least confident generation, with only 46% saying they believe they’ll hit retirement in good financial shape. This group is the first to lean heavily on 401(k) plans as a primary means of saving and is generally more underprepared for retirement.
To reach the $1.26 million goal, workers who begin saving at age 20 would need to save $330 per month, while those starting at age 30 would need to save $695 per month, according to Northwestern Mutual.
Retirement savings goals and challenges
John from AARP offered some advice for people planning their retirement:
1.
Start saving if you haven’t already. 2. Wait to retire as long as you can to get the maximum monthly payment from Social Security.
3. Take full advantage of your employer’s match program if you have one. 4.
Avoid reacting to market volatility by suddenly moving your investments into something safer. While the “magic number” provides a general guideline, it’s clear that many Americans are far from reaching it. Employer support, such as auto-enrolling new hires into 401(k)s, can play a crucial role in helping employees improve their retirement savings efforts.
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