Americans Say They Need $1.2 Million to Retire. Most Aren’t Saving Enough.

High inflation and volatile markets are the reason for the increase, says Christian Mitchell, chief customer officer at Northwestern Mutual. “We’ve also seen upticks in spending year-over-year not only as a result of inflation, but also as people have resumed a sense of normalcy in their lives following the earlier days of the pandemic,” he said in a statement. “These factors are leading many people to recalibrate their thinking about how much they’ll need to retire and how long it will take them to get there.”

The Northwestern Mutual survey—which polled 2,381 American adults aged 18 or older—found that Americans’ average retirement savings has fallen to $86,869 from $98,800 last year, an 11% decline. A quarter of Americans say they are upping their retirement savings, and many more expect to work longer than originally planned. The expected retirement age has risen to 64 from 62.5, according to the survey. 

At the same time, 55% of Americans say their retirement savings are not where they need to be, up three percentage points from a year ago, according to a survey by personal finance website Bankrate. Just over a third of Americans say they’re “significantly behind” their retirement savings goals. And it’s a more acute problem among older Americans, with 71% of baby boomers reporting they’re behind on savings, according to Bankrate, which polled 2,312 adults.

Investors may find it hard to catch up to their savings goals. They’re facing headwinds, with markets tumbling this year and inflation soaring to record highs. Hiring has also slowed, though the unemployment rate remains at a low 3.5%. 

“Those who already feel behind are twice as likely to be contributing less this year than workers who feel they’re on track or ahead of where they should be,” Greg McBride, Bankrate’s chief financial analyst, said in a statement.

Retirees have gotten some relief this year in the form of higher Social Security benefits. The recently announced 8.7% cost-of-living adjustment was the highest since the 1980s. 

And the IRS has boosted the 401(k) and IRA contribution limits to account for inflation; people 50 and over can put an additional $3,000 into their workplace plans in 2023 over this year. Of course, a rebound in markets would also lift investors’ retirement assets. 

Still, Americans have long struggled with saving enough for retirement. And many investors today are pessimistic about their retirement outlook, according to the Northwestern Mutual survey. Forty-three percent of respondents say they do not expect to be financially ready for retirement.

Write to Andrew Welsch at [email protected]