April 20, 2024

It’s becoming more and more expensive to retire — at least in the minds of Americans.

A new study by Northwestern Mutual found that U.S. adults believe that they’ll need $1.46 million to retire comfortably. This so-called “magic number” grew by more than 53% from $951,000 in 2020, according to the financial services firm.

The latest figure also represents a 15% jump from the $1.27 million Americans reported just last year — a major stretch beyond the rate of inflation in the U.S., which is currently hovering around 3%.

With an overburdened social security system unable to keep up with the growing number of retirees and people living far longer than they used to, the Social Security Administration has warned that the trust funds that some 66 million Americans rely on will be depleted in 2034. This year alone, more than four million Americans will turn 65, the average retirement age — the largest wave of Americans reaching the retirement age in history, Northwestern Mutual said.

With the growing belief that a comfortable retirement may be out of reach, the youngest generation entering the job market is planning to start building their nest egg earlier than ever before.

Gen Z, on average, is planning to begin saving for retirement at age 22 — nine years earlier than the average American. The contrast is even starker by generation: Baby Boomers said they began saving at 37, Gen X at 31, and Millennials at age 27.

The idea for Gen Zers is that they’ll be able to leave the job market earlier if they start saving as soon as possible: Gen Z hopes to retire at age 60, while Boomers plan to work until 72. Millennials and Gen Xers fall somewhere in the middle, expecting to work until 64 and 67, respectively.

Read more: BlackRock’s Larry Fink thinks America’s retirement age is ‘a bit crazy’

The two youngest generations — Gen Z and Millennials — are also expecting to have the costliest retirements, both projecting that they’ll need more than $1.6 million to live comfortably.

But these sky-high figures are not yet reflected in actual savings, Northwestern Mutual found. The average amount that U.S. adults have saved for retirement fell from $89,300 in 2023 to $88,400, and remains more than $10,000 off the $98,800 five-year peak seen in 2021.

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