How Much Do You Need to Retire Comfortably?

The ability to retire comfortably feels harder and harder to reach these days, and for some, it may be seem impossible. Nowadays, retirement planning poses thorny challenges, such as the funding shortfall for Social Security and Medicare, an aging population, rising prices and inflation. For those reasons (and more) how much Americans believe they will need to retire comfortably is all over the place. But the 'magic number' is usually just north of $1 million, according to industry studies.

A study by Schroders says retirees think they need $1.2 million. A Northwestern Mutual study takes it up a notch to $1.46 million. People who responded to a Charles Schwab survey raised the bar to $1.8 million. Even so, there's no retirement savings target that's right for everyone.

Still, roughly $1 million falls far short of the average amount that U.S. adults have saved for retirement. Individuals age 35 to 44 have about $142,000 saved for retirement, while people age 55-64 have just under $538,000. Of course, those numbers can be skewed by people who have large nest eggs, so that the median numbers might be significantly lower, according to the Federal Reserve.

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Given that 11,000 Americans will turn 65 every day through 2027, only half of Boomers and Gen Xers believe they’ll be financially ready for retirement when the time comes.

Whether you are a 401(k) millionaire or a young person just starting to save for retirement, knowing how your savings compare to your generation's expectations can be helpful. The Northwestern Mutual study also provides insight into how much high-net-worth individuals think they need to save.

Can boomers retire comfortably?

Per the study, only about half of boomers (49%) believe they will be financially prepared for retirement. In 2024, 48% of boomers surveyed expected the United States to enter a recession. That's down from 60% in 2023. Are we still headed for a recession in the second half of 2025? That's anyone's guess.

Although Americans overall feel they need more than $1 million to retire comfortably, in late 2024, boomers expected to need $990K, per the Northwestern Mutual study. That's a far cry from the $120,300 they currently have saved. In addition, 37% of boomers feel they will likely outlive their savings.

Despite high levels of financial insecurity, many boomers (35%) expect to reduce their spending on discretionary items like restaurants, vacations, and entertainment in 2025. However, 42% say they will spend about the same as in 2024. According to the Allianz Life New Year's Resolutions Study, financial stability is always a top priority, and it will be for 33% of boomers in 2025.

Gen Xers

Like boomers, almost half (48%) of Gen Xers believe they are financially prepared for retirement, and 42% worry they could outlive their savings. The Allianz study also showed that 37% of Gen Xers will prioritize financial stability in 2025.

The magic number that most Gen Xers feel they need to retire is $1.56 million. This is much higher than the average amount they have saved — $108,600 — and higher than most Americans feel they will need. In short, Gen X retirement is in trouble.

Although nearly all Americans have some kind of debt, high-interest credit card debt is the main source of debt for 30% of Gen Xers. To make matters worse, more than four in ten, or 42% of Gen Xers (43% of millennials) say their personal debt is at or near its highest level ever.

Gen Xers are also the least likely generation to map out a plan to fund a comfortable lifestyle once they retire, with half (48%) of Gen Xers saying they have not done any retirement planning. That's according to a Schroders 2024 U.S. Retirement Survey. This lack of planning exceeds the 41% of millennials and baby boomers who say they don't have a retirement savings game plan.

Are millennials prepared? (or not so much)

The plan for those who favor protecting their retirement mostly focuses on cutting costs (56%) and building savings (51%). Younger generations score high on adding a side hustle — 43% for millennials — and about one in six millennials (16%) said they would get a financial advisor to help manage their money. In comparison, 15% said they would buy or increase life insurance coverage.

Gen Z and millennials expect to need more than $1.6 million to retire comfortably. And although they are still a long way from leaving the workforce, the Northwest Mutual survey showed millennials currently have just $62,600 saved, a gap of $1.59 million between what they feel they need and what they have saved. On a positive note, the research also revealed that three in 10 millennials believe it’s likely or highly likely that they will live to age 100, giving them time to make a plan to make up the difference.

Gen Z are not slackers

On average, American adults say they started saving for retirement at age 31. But Gen Zers say they began at age 22 — nearly a decade earlier, hoping that starting earlier will help them reach their retirement goals sooner. That is also a full 15 years before boomers, who say they started when they were 37. Millennials and Gen Xers began saving for retirement at ages 27 and 31, respectively.

“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,” said Aditi Javeri Gokhale, Northwestern Mutual's chief strategy officer, president of retail investments, and head of institutional investments.

How prepared are high net worth individuals?

High-net-worth individuals (HNW) — those with more than $1 million in investable assets — say they’ll need nearly $4 million to retire comfortably, according to the survey. Yet, nearly half (48%) of American millionaires believe their financial plans need improvement.

HNW individuals are far more likely to exhibit feelings of financial preparedness than the general population. It makes sense, as more of them have high levels of financial literacy.

One reason for their confidence is that over half (69%) of HNW individuals work with a financial adviser; more than double the general population. Overall, they are also more focused on creating intergenerational wealth. Six in ten (61%) high-net-worth Americans say they plan to reduce the taxes they will owe on their retirement savings, giving them more money to spend and leave to their heirs.

HNW individuals also typically save more, spend less, invest wisely and grow in their career over time to invest more money in their 401(k) retirement account as a path to becoming a 401(k) millionaire or multi-millionaire.

How do you compare?

Are you rich? There are a few ways to know how you compare to peers in your generation. For example, the average net worth by age can give you a snapshot of how you measure up. However, the average net worth for U.S. families is about $1.06 million, according to an article by GoBankingRates. If that seems too high, that's because extremely wealthy outliers skew the data upward. A more reliable measure is the median net worth, which was $192,700.

It's not surprising that older Americans tend to have higher net worth. After all, they have spent their entire lives accumulating assets, such as 401(k)s, IRAs, real estate, and equity in their own businesses.

As shown by Kiplinger's Net Worth Calculator, your net worth is comprised of various financial assets, including investments, your home, retirement accounts and cash, versus liabilities, such as money owed on mortgages, home equity loans, credit cards, installment loans, and similar costs.

What about retirement savings? Your 401(k), IRA or other retirement savings are distinct from your net worth. Take a look at the average IRA balance by age and the average 401(k) balance by age.

A good rule of thumb for saving for retirement

The amount you need to save for retirement can rise and fall over the years, but is typically based on factors such as lifestyle choices, spending habits and the cost of living. However, Fidelity suggests people save for retirement using the following rules of thumb based on their annual income:

• 30 years old: 1X your annual income
• 40 years old:: 3X your annual income
• 50 years old: 6X your annual income
• 60 years old: 8X your annual income
• 70 years old: 10X your annual income

While these numbers probably vary from one financial advisor to another, it is apparent that many individuals and families are falling short. According to the most recent (2023) data by the Bureau of Labor Statistics, the average American annual wage across all occupations was just $65,470.

Investing in a future you

Unfortunately, putting money into a 401(k) or another retirement plan may no longer be enough to retire comfortably. This is especially true if you don't consider the impact of taxes or fees on your retirement income or if you begin contributing later in life.

If these stressors keep you up at night, sleep better by slaying those retirement fears. Enlisting the help of a financial adviser early on in your career may also help you have a happy retirement (and relieve some of that pent-up stress). After all, retirement is a long game that, sooner or later, you’ll be forced to play.

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