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3 min read

Struggling to save: Americans facing retirement crisis

Wisconsin  Many Americans are struggling to save enough money for retirement.

By the end of the decade, about 21% of the country’s population will have turned 65 or older, up from 15% in 2016, according to forecasts by the Census Bureau. Most non-retired adults have some type of retirement savings, but only 36% said their savings are on course.

For those staying the course, there's even a new so-called "magic number" they will need to retire. That number  $1.46 million  comes from the latest top-level findings from Northwestern Mutual's 2024 Planning & Progress Study. The company's proprietary research series explores Americans' attitudes, behaviors and perspectives across a broad set of issues impacting their long-term financial security.

The magic number is a 15% increase over the $1.27 million reported in 2023, far outpacing today's inflation rate that currently hovers between 2% and 3%. During a five-year span, people's 'magic number' has jumped 53% from the $951,000 target Americans reported in 2020. That said, $1.46 million is an estimate meaning the amount differs from person-to-person. Still, the findings have led to anxiety for many, especially half of Boomers+ and Gen X who believe they won't be financially ready for retirement. 

"That's a daunting number. It's probably not going down anytime soon either... in fact, it's probably going up," shared banker and former Speaker of the Oklahoma House of Representatives T.W. Shannon. 

By generation, both Gen Z and Millennials expect to need more than $1.46 million to retire comfortably. High-net-worth individuals – people with more than $1 million in investable assets – said they will 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 is more than $10,000 off its five-year peak of $98,800 in 2021.

Across all segments, there are large gaps between what people think they'll need to retire and what they've saved to date.

PLAN AHEAD

Shannon recommended developing a realistic retirement strategy as early as possible.

"Decide in your thirties or forties what your cost of living should be. What your standard of living is. Give yourself grace. And you can give yourself grace by giving yourself time to prepare. And keep in mind that the plan doesn't have to be permanent and you can change course anytime," said Shannon. 

The study found the average age that Americans said 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 said they started when they were 37. Millennials and Gen X'ers began saving for retirement at ages 27 and 31, according to the study.

The hope among Gen Z is that by starting to save sooner, they can retire earlier. They expect to retire at the age of 60, a dozen years before Boomers+ who said they'll work until they're 72. Millennials and Gen X'ers expect to work until 64 and 67. The average age most people expect to work to is 65, according to the study.

The research discovered that three in 10 Millennials and Gen Z Americans believe it's likely or highly likely that they will live to age 100. The sentiment among these younger generations is stronger than older generations. Among Gen X and Boomers+, just 22% and 21% agreed that they believed they would live to 100.

BlackRock CEO Larry Fink has suggested one way to fix the country's retirement crisis is for Americans to work longer. 

In his annual shareholder letter, Fink, who is worth an estimated $1.2 billion, wrote in part:

"What’s the solution here? No one should have to work longer than they want to. But I do think it’s a bit crazy that our anchor idea for the right retirement age — 65 years old — originates from the time of the Ottoman Empire.

One nation that’s rethought retirement is the Netherlands. In order to keep their state pension affordable, the Dutch decided more than 10 years ago to gradually raise the retirement age. It will now automatically adjust as the country’s life expectancy changes.

 

 

Obviously, implementing this policy elsewhere would be a massive political undertaking. But my point is that we should start having the conversation. When people are regularly living past 90, what should the average retirement age be?"

 

 

 

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