Published by Inc.com | April 3, 2024
A new survey finds the average American thinks they'll need nearly $1.5 million to retire, a 53 percent rise since 2020 that contrasts with flatlining rates of savings
Over the years, business owners, managers, and investors have all probably extended the time frames in which they’re expecting to transition from work to retirement. But a new study shows just how fast–and large–the amount of money Americans think they’ll need to comfortably retire has risen lately, and many people’s nest eggs aren’t sufficient.
Despite booming stock markets that increased the value of assets held in 401(k) accounts by 19 percent last year, a new survey shows a growing number of Americans are clearly worried about the money they’ll need to retire comfortably. The study by financial services company Northwestern Mutual indicates the average respondent said they’ll need $1.46 million to finance life after work. That sum represents an eye-popping 15 percent rise over the $1.27 million average given just a year ago, and an astonishing 53 percent hike over $951,000 in 2020.
Those inflationary expectations–or fears–about the small fortunes respondents believe they’ll need to fund retirement starkly contrast the money people have tucked away for it. The survey found respondents’ current savings average a comparatively piddling $88,000–only $900 more than in 2020, and $900 less than last year.
Those differences in funds squirrelled away versus expected requirements reflect the national retirement funding challenges. So many changes are needed that BlackRock CEO Larry Fink detailed them in his recent letter to investors, with the idea Americans may have to work longer grabbing headlines.
On the one hand, he argued for a diversification of retirement investment programs available to wage earners, as well as an employer obligation to set workers up with mandatory savings plans. He also said people of all backgrounds should be better educated about the amounts they’ll realistically need to finance their leisure years–and how to spend those sums without fearing they’ll exhaust them prematurely.
Those concerns seem justified by recent trends. For starters, life expectancy is rising, as are health care costs that considerably mount in older age. Meanwhile, market fluctuations that sent 401(k) investments up last year can just as quickly head back down. The recent period of strong inflation is also making people wonder about how just much will ever be enough once they’ve ceased working.
