Working Americans 45 and older say they will need $1.1 million to retire comfortably. BongkarnThanyakij
As the cost of living in the US continues to rise, American workers are rethinking how much they need to save for a comfortable retirement. And it’s a lot more than they think they’ll be able to put away.
Those 45 and older say they’ll need $1.1 million, according to the Schroders 2023 US Retirement Survey, which surveyed 2,000 American investors with a median household income of $75,000. Millennials surveyed say their target is $1.3 million.
Schroders’ results are actually lower than what many financial professionals suggest they should save and what other surveys have found Americans say they should be comfortable saving for retirement.
Some Americans say it would take $3 million to $5 million to feel rich, according to a recent report from Edelman Financial Engines, a New York-based financial advisory firm. That’s likely to grow as millennials and Gen Z age and the cost of living continues to rise.
“In the past, if you were a millionaire, it was a foregone conclusion that you were rich,” says Isabel Barrow, director of financial planning at Edelman Financial Engines. Now we see that even if you are a real millionaire, only 30% actually consider themselves rich.”
Workers bear more costs
It’s becoming increasingly difficult for workers to meet those retirement savings targets. Only 29% of millennials and 21% of people over 45 say they expect to reach even $1 million in retirement savings, according to Schroders. In fact, 59% of older workers and 49% of millennials expect to save less than $500,000.
As it stands, the average full-time American worker with a 401(k) socked away $35,354 last year, according to Vanguard (the average, skewed by high earners, is $141,542).
Pensions are rare these days, so workers are forced to save more on their own than in the past. They also compete with sky-high prices for almost everything, especially big-budget items like housing, transportation, and education.
Financial advisors say try to limit those expenses so you can save more, but that can be difficult given today’s cost of living.
“Cars, housing, food, gas prices, they’ve all gone up,” says Barrow. “While it may not seem like much of a bite every year, when you compound it, it’s a pretty significant shift. And it’s unlikely that all hell will descend. Once it goes up, it tends to stay there.”
If wages don’t keep up with inflation, it can all seem a little impossible. The vast majority of workers say they worry about money every day, according to research from Schroders, including 85% of millennials (the survey does not include any Gen Z workers).
“We have this standard in our mind, millionaire status means something,” says Barrow. “It is, but it may not be the goal to hang your hat on anymore. For many to feel rich or ready for retirement, that number will be significantly higher.”