Not only have day-to-day expenses such as groceries, rent and fuel soared during President Biden’s tenure, but new data also reveals a stark increase in the savings Americans believe they require for a comfortable retirement.
The size of the nest egg that people consider adequate for a comfortable retirement has spiked to $1.46 million, according to Northwestern Mutual, marking a 15% increase from last year’s $1.27 million and a 53% rise from the pre-Biden $951,000 in 2020.
“In 2023, the soaring cost of eggs in the grocery store symbolized inflation in America. In 2024, it’s nest eggs,” Northwestern Mutual Retail Investment President Aditi Javeri Gokhale said. “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. Inflation is expanding our expectations for retirement savings, and putting the pressure on to plan and stay disciplined.”
Amid such financial planning shifts, the Consumer Price Index documented a 3.2% increase in inflation in February.
The Northwestern Mutual study casts light on a discrepancy between retirement aspirations and actual savings. This year, the average retirement savings of U.S. adults dropped slightly to $88,400 from $89,300 in 2023. More strikingly, that figure has fallen by $10,000 from a five-year high of $98,800 reported in 2021.
Mr. Gokhale suggests paying attention to another factor in needed retirement funds — the taxation of 401(k) contributions, which could significantly affect one’s golden years.
“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,” he warned.
The research found that Generation Z is actively addressing retirement earlier than their parents and grandparents did, beginning to save at an average age of 22, with aspirations to retire by 60. Baby boomers typically started saving at age 37 and anticipate working until 72. Generations X and millennials aim to retire within the 64-67 age range.
“These numbers tell a fascinating story about the profound shift in financial planning that has taken shape in America,” Mr. Gokhale said. “Young people today recognize the value of retirement planning and building wealth early on in life and are getting a significant head start over their parents and grandparents. At the same time, Gen Z is redefining retirement and signaling that they plan to have long and fulfilling post-career lives. The good news is that they are investing earlier so they can save the money they need to enjoy it.”
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