Here's How Much Americans Think They'll Need for a Comfortable Retirement

Another new study suggests that most Americans are falling behind on saving for retirement.

According to a Northwestern Mutual report released Tuesday, U.S. adults think they will need $1.25 million to retire comfortably, a 20% rise from 2021. Yet Americans' average retirement savings have dropped by 11% from last year to $86,869.

"It's a period of uncertainty for many people, driven largely by rising inflation and volatility in the markets," Christian Mitchell, chief customer officer at Northwestern Mutual, said in a statement. "We've also seen upticks in spending year-over-year not only as a result of inflation, but also as people have resumed a sense of normalcy in their lives following the earlier days of the pandemic."

As a result, Mitchell said, many people are recalibrating their thinking about how much they will need to retire and how long it will take them to get there.

The Harris Poll conducted an online survey on behalf of Northwestern Mutual in February among 2,381 American adults.

The survey found low confidence among respondents about their retirement preparedness, and not much faith in Social Security as a backstop. Forty-three percent said they do not expect to be financially ready for retirement when the time comes. And 45% said they can imagine a time when Social Security no longer exists.

At the same time, one-third of those surveyed expect to live to 100, and an equal third said there is a better than 50% chance they may outlive their savings. But 36% reported that they have not proactively addressed this concern.

Working Longer Before Retirement

Americans on average plan to work until age 64, up from 62.6 last year, according to the study. It also found that working with an advisor can reduce the anticipated retirement age to 61, and for disciplined planners to 62.

"It's one of those questions on so many people's minds — how long should I expect to work in order to save enough for retirement?" Mitchell said. "It's really difficult to answer because there are all kinds of considerations to factor in. But too many people grapple with it in a bubble."

He said professional advice can provide clarity and help ensure a more confident decision. When asked about how the pandemic has affected their retirement timelines, 25% of participants said they plan to retire later than they had anticipated. The main reason, cited by 59%, was a desire to work and save money.

Fifteen percent said they plan to retire earlier than expected, with 44% explaining that they want to spend more time with family and loved ones.

Other recent research found that most older working Americans know they can receive higher Social Security benefits if they wait until age 70, but only 11% plan to do so.

Finally, the Northwestern Mutual study uncovered data about what Americans value in their work lives: 60% of adults prioritize personal fulfillment over salary, and 40% income potential in their careers.

"This is a really fascinating finding and one that advisors should take note of as they work with their clients," Mitchell said. "What people prioritize goes well beyond their bottom lines. The best advisors understand their clients' values and motivations, not just their financial situations."