Here’s the money Americans think they need for retirement

Americans have big goals for retirement, and a new survey finds they believe they will need $1.25 million in savings to make a comfortable living in their golden years. But the disturbing truth is that most people find themselves miles from that goal, with the typical US retirement account under $87,000.

Of course, the so-called retirement gap—the difference between the amount of money people will need in later years and what they actually squirrel with—is a longstanding issue. But the gap between Americans’ long-term financial prospects and the more dire reality is widening as many today struggle to pay for even basic needs like food and shelter, let alone planning for retirement.

The latest distress signal has emerged in a new Northwestern Mutual study, an annual survey of more than 2,000 adults’ attitudes and behaviors towards money and financial planning. The analysis found that the typical American now estimates they will need $1.25 million for a comfortable retirement – ​​a 20% jump from 2021. At the same time, the average retirement account has lost 11% over that time to $86,869 this year. year.

“People are feeling financial distress right now. It’s a harder environment to save, and many have seen losses on their investments and 401,000 portfolios,” Northwestern Mutual financial advisor Tim Harrison told CBS MoneyWatch in an email.

Inflation and other factors “raise estimates that people will need to retire comfortably. So we see people pushing the age they expect to retire, and more say they’re not sure they’ll be ready when they retire. It’s time,” he added.

The findings come as more research emerges about America’s lack of preparation for retirement. According to a study published by Goldman Sachs earlier this month, only a quarter of current retirees earn enough to replace $7 out of every $10 in pre-retirement income—the usual rule of thumb for a comfortable retirement.

About half of retirees live on less than half their pre-retirement income, Goldman said, and older Americans are “particularly vulnerable” to inflation and other economic trends.

“We have a pensions problem in the US,” Greg Calnon, head of multi-asset solutions at Goldman Sachs Asset Management, said on a conference call about his findings. The US pension system “shifted responsibility from employer to employee” with the transition from pensions to 401(k)s.


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Workers are dealing with “very high market volatility and longer life expectancies,” he added. “It’s a tough mix for individuals to navigate.”

The general rule for retirees is to withdraw no more than 4% of their annual 401(k) and other savings, meaning a $1.25 million retirement account will generate an annual income of $50,000. An $87,000 retirement account will provide about $3,500 per year.

big illusion

Northwestern Mutual said that 4 in 10 Americans think they won’t be ready to retire. As a result, Americans who were 62.6 years old last year now say they plan to retire at 64.

Yet the real experience of retirees shows that many Americans will have little choice when they retire. Goldman’s survey of people who are now retired found that 56% left the workforce ahead of schedule. And nearly half said they retired for reasons beyond their control, such as health issues, losing their job or needing to care for family members. According to the study, only 7% said they retired because they had enough money.

Goldman’s experts said young workers must also save for retirement while dealing with raising children, caring for elderly parents and the rising cost of living. Such a “vortex of competing financial needs can derail retirement readiness,” said Mike Moran, senior retirement strategist at Goldman Sachs Asset Management. “This is the new reality for retirement savers.”

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