The amount of money Americans think is necessary to retire decreased over the past year as inflation cooled, easing fears about retirement costs spiraling out of control. The shift was observed in an annual Northwestern Mutual survey that asks about respondents’ “magic number” for retirement.
On average, people believe they’ll need $1.26 million, a significant decrease from last year, when the estimate was $1.46 million.
“Americans’ ‘magic number’ to retire comfortably has come down — but it remains high, far beyond what many people have actually saved,” John Roberts, chief field officer at Northwestern Mutual, said in a release.
Last year’s magic number of $1.46 million was the highest ever observed. The theory was that the explosion in costs for housing, groceries and other items from 2021 to 2023 caused Americans to rethink how much they would need for their retirement.
This year, the magic number for retirement is more in line with 2022 and 2023 levels.
Still, most Americans fear they’ll run out of money in retirement, according to the survey, which polled more than 4,600 people in January. Even with the magic number estimate dropping, folks’ actual retirement savings are generally short of the amounts they think they’ll need in retirement. Gen X (people born between 1965 and 1980) notably still has a long way to go. “For Gen X’ers, many of whom are approaching their retirement years, 52% have 3x their current annual income or less saved. And the majority (54%) believe they will not be financially prepared for retirement when the time comes,” the Northwestern Mutual release said.
This Northwestern Mutual report isn’t the only annual survey asking a version of the magic number question. In July, a study from Charles Schwab found that the average amount of money people think they’ll need in retirement is $1.8 million.
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