A new survey finds that Americans’ “magic number” for retirement has surged to an all-time high, jumping 15% in just a year and a whopping 53% since the onset of the pandemic.
As a result, Americans now believe they will need to save $1.46 million to retire comfortably, up from $1.27 million reported last year, according to Northwestern Mutual’s 2024 Planning & Progress Study, which explores attitudes, behaviors and perspectives on issues impacting long-term financial security.
By generation, both Gen Z and Millennials say they expect to need more than $1.6 million to retire comfortably, while high-net-worth individuals say they'll need nearly $4 million.
Meanwhile, the average amount that U.S. adults have saved for retirement dropped modestly from $89,300 in 2023 to $88,400 today, but that level is still more than $10,000 off its five-year peak of $98,800 in 2021, the study shows.
| Amount Expected to Need to Retire Comfortably | ||||
|---|---|---|---|---|
| 2024 | 2023 | 2022 | 2021 | 2020 |
| $1.46 million | $1.27 million | $1.25 million | $1.05 million | $951,000 |
“People's ‘magic number’ to retire comfortably has exploded to an all-time high, and the gap between their goals and progress has never been wider,” observed Aditi Javeri Gokhale, chief strategy officer, president of retail investments and head of institutional investments at Northwestern Mutual. “Inflation is expanding our expectations for retirement savings and is putting the pressure on the ability to plan and stay disciplined.”
Starting Sooner, Ending Earlier
Notably, the study finds the average age that Americans say they started saving for retirement is 31, but for Gen Z, it’s 22—nearly a decade earlier. It’s also a full 15 years before Boomers, who indicated that their average starting age was 37. By comparison, Millennials and Gen Xers began saving for retirement at ages 27 and 31, respectively.
For Gen Z, the hope is that by starting to save sooner, they will be able to retire earlier. They expect to retire at the age of 60, a dozen years before Boomers who say they plan to work until they're 72. Millennials and Gen Xers expect to work until 64 and 67, respectively. The average age most people expect to work is age 65.
The ‘Silver Tsunami’
While it has been talked about for years, the so-called “Silver Tsunami” is here, as the country is now facing the largest surge of Americans hitting the traditional retirement age in history. In 2024, more than four million Americans will turn 65. That's an average of 11,000 Americans per day, and it will continue through 2027, according to the study.
Northwestern Mutual’s study also found that among generations closest to retirement, just half of Boomers (49%) and Gen X (48%) believe they will be financially prepared when the time comes.
On average, Gen X believes there is a 42% chance they could outlive their savings, while Boomers put the probability at 37%. Across both generations, more than a third (37% and 38%, respectively) have not taken any steps to address the possibility of outliving their savings, the study shows.
Tax Implications
Meanwhile, only 3 in 10 (30%) respondents said they have a plan to minimize the taxes they pay on their retirement savings. Among some of the top strategies employed include:
- Making withdrawals strategically from traditional and Roth accounts to remain in a lower tax bracket (32%)
- Using a mix of traditional and Roth retirement accounts (30%)
- Making strategic charitable donations (24%)
- Using a health savings account (HSA) or other tax-advantaged healthcare account (23%)
- Using products like permanent life insurance or annuities for the tax benefits (22%)
- Making Roth conversions prior to taking required minimum distributions (RMDs) or Social Security (19%)
- Making contributions to other tax-advantaged accounts like a 529 plan (14%)
- Taking advantage of a qualified longevity annuity contract (QLAC) to set aside funds for later in retirement (13%)
“Putting money into a 401(k) may not be enough to retire comfortably if the financial plan doesn't address the impact of taxes on retirement income,” Javeri Gokhale emphasized. “Most people don't realize that their retirement income may be taxed about 20% or 30% when they withdraw and spend it. When they recognize the impact, it's often too late for them to adjust,” she further warned.
The study was conducted online between Jan. 3–17, 2024, by The Harris Poll on behalf of Northwestern Mutual among 4,588 U.S. adults.
