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Americans now expect they will need $1.25 million to retire comfortably, according to a new study from Northwestern Mutual. That figure represents a 20% increase from the $1.05 million respondents cited last year.
That’s not necessarily good news for individuals who have seen their retirement savings decline in the past year amid persistent high inflation and market volatility. The average retirement nest egg has fallen 11% to $86,869, down from $98,800 a year ago, Northwestern Mutual’s survey found.
Moreover, the expected retirement age has risen to 64, up from 62.6 last year.
The results, which were released by the firm on Tuesday, are based on an online survey conducted in February that included 2,381 adults ages 18 and up. Northwestern Mutual was not available for comment by press time.
Northwestern Mutual’s report comes as another survey from Bankrate.com found 55% of working Americans feel they are behind in their retirement savings as higher costs strain household budgets.
Those closest to retirement — working baby boomers ages 58 to 76 — were most likely to say they feel behind, with 71%, Bankrate.com found. Many of those near retirement reported wishing 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.
Why people plan to work longer
A quarter of Northwestern Mutual’s survey respondents — 25% — plan to retire later than they had anticipated.
The top reason why, cited by 59%, is they want to continue to work and save money.
Other reasons included concerns about rising health care costs and unexpected medical costs, with 45%. About a quarter, 26%, are taking care of relative or friend, and 24% have had to dip into retirement savings, 24%.
At the same time, the survey found 15% of respondents plan to retire earlier. The top reason, cited by 44%, was to spend more time with family and loved ones.
Other reasons included prioritizing a personal mission over saving more, with 34%; being able to afford it, 32%; focusing on priorities and hobbies outside of work, 28%; being offered a buyout or other incentive plan, 22%; or changing work situation, 22%.
Shaky faith in Social Security
When it comes to retirement income, individuals surveyed said they expect to draw from a mix of 401(k) or other retirement account funds, for 27%; Social Security, 26%; and personal savings or investments, 22%.
Yet, 45% of respondents said they can imagine a time when Social Security no longer exists.
Despite the reliance on Social Security, a new report from the Center for Retirement Research at Boston College finds early claiming actually slightly declined during the Covid-19 pandemic.