This browser does not support the Video element.
Early retirement could cost you thousands of dollars
Research by Boston University economists and the Federal Reserve Bank of Atlanta says only 6% of U.S. workers wait until the maximum age of 70 to claim all possible Social Security benefits.
The "magic number" that Americans believe they need to retire comfortably is surging to an all-time high, according to a new study by Northwestern Mutual.
U.S. adults believe they will need $1.46 million for retirement, a 15% increase over the $1.27 million reported last year," Northwestern Mutual's 2024 Planning & Progress Study found.
Over a five-year span, Americans’ "magic number" has jumped a whopping 53% from the $951,000 target reported in 2020, the financial service organization said.
The 2024 Planning & Progress Study explores Americans' attitudes, behaviors and perspectives regarding long-term financial security and involved more than 4,500 U.S. adults in January.
Americans’ ‘magic number’ by generation
FILE - An elderly couple walks hand-in-hand down a street in Santa Fe, New Mexico. (Photo by Robert Alexander/Getty Images)
When looking across different generations, both Gen Z and Millennials expect to need more than the national average to retire comfortably, according to Northwestern Mutual.
Gen Z estimated $1.63 million, while Millennials think they’ll need $1.65 million to retire comfortably.
Gen X, or those born between 1965 and 1980, estimated needing $1.56 million, and Boomers – generally born between 1946 to 1964 – believe they’ll need $990,000.
High-net-worth individuals, or people with more than $1 million in investable assets, said they'll need nearly $4 million to retire comfortably, according to the study.
Average retirement savings in 2024
The average amount that American adults have saved for retirement dropped modestly from $89,300 in 2023 to $88,400 in 2024, according to Northwestern Mutual’s study.
That’s a $1.37 million gap between the average current savings and the average retirement goal.
The study comes as a record number of Americans have dipped into their 401(k) accounts for financial emergencies amid ongoing high inflation. Hardship withdrawal activity from 401(k) accounts increased in 2023, going from 2.8% of people in 2022 who initiated a hardship withdrawal to 3.6% of participants last year, according to the Vanguard Group, which tracks about 5 million accounts.
Aditi Javeri Gokhale, chief strategy officer, president of retail investments and head of institutional investments at Northwestern Mutual, said inflation has expanded "our expectations for retirement savings."
"In 2023, the soaring cost of eggs in the grocery store symbolized inflation in America. In 2024, it's nest eggs," Gokhale said in a statement. "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."
"Making a 'magic number' appear isn't about waving a wand; it's about using time-tested techniques and learning from a skilled advisor," Gokhale added.
Average age people start saving for retirement
The average age U.S. adults begin saving for retirement is 31, Northwestern Mutual’s study found.
However, there were big differences on this subject across generations.
Gen Z, or those born between 1997 and 2012, begin saving for retirement at age 22, on average – nearly a decade earlier.
Boomers in the study said they started when they were 37, while Millennials and Gen X'ers began saving for retirement at ages 27 and 31, respectively, according to Northwestern Mutual.
By saving sooner, Gen Z also hopes to retire earlier, according to the study.
"They expect to retire at the age of 60, a dozen years before Boomers+ who say they'll work until they're 72," the company said. "Millennials and Gen X'ers expect to work until 64 and 67, respectively. The average age most people expect to work to is 65."
This story was reported from Cincinnati.