Americans have lowered their estimate of how much they’ll need to retire comfortably, according to a new study by Northwestern Mutual. The “magic number” cited in this year’s data is $1.26 million, $200,000 lower than the $1.46 million estimate last year and similar to estimates given in 2022 and 2023.
But 25% who have retirement accounts report they have saved one year or less of their current annual income for it. And 51% fear it’s somewhat or very likely they will outlive their savings, according to Northwestern Mutual’s 2025 Planning & Progress Study, which explores attitudes, behaviors, and perspectives across a range of issues impacting American’s long-term financial security.
“Americans’ ‘magic number’ to retire comfortably has come down — but it remains high, far beyond what many people have actually saved,” John Roberts, chief field officer at Northwestern Mutual, said in a news release. “One explanation for the new number could be inflation — while still people’s #1 concern — isn’t as elevated as it was in recent years.”
Roberts noted that the inflation rate declined from 6% in 2023 to approximately 3% in 2024, with the result that Americans are adjusting their expectations of their future financial needs.
The study reveals differences between generations and how they are approaching retirement:
The average Gen Zer starts saving at 24 and plans to retire at 61. And 34% expect to live to 100. Boomers+ on average began saving at 37 and plan to retire at 72, and 23% expect to reach the century mark.
Gen Zers have the greatest confidence in their retirement plans, with 63% saying they’ll be financially ready when it’s time to retire.
However, 54% of Gen Xers fear they won’t be financially prepared for retirement. Among Gen Xers, 52% have three times their current annual income or less saved.
Eight in 10 survey respondents say their vision of retirement is different from that of their parents’ generation, and 32% expect their retirement to last over a decade longer than their parents’.
Only 16% of Americans say the prospect of outliving their wealth is “very unlikely,” while, 35% say they have not taken any steps to address that potential outcome.
Northwestern Mutual notes that the amount Americans need to invest each month to save $1.26 million by age 65 depends first and foremost when they start saving. Those who start at age 20 would need to invest $330 per month – based on a 7% rate of return compounded daily, while those starting at 30 would need to save $695 per month. The older they are when starting, the more needed to save per month: age 40, $1,547, and 50, $3,958.
The company advises individuals to plan to replace around 80% of their pre-retirement income. But the “magic number” calculation also depends on when they plan to retire, where they’ll live, and what kind of retirement lifestyle they want.
On average, working-age Americans start saving for retirement at age 31 and plan to retire at 65. In general Americans are starting to save earlier, plan to retire earlier, and expect to live longer.
The insurance company says a “big blind spot” for younger Americans is that they prioritize investing over insurance. The survey found that 61% of Gen Z and 60% of Millennials place too much emphasis on building wealth and growing their assets while dedicating too little to protecting those assets and managing against risks with life or disability insurance. Among Boomers, 35% report the same.
“People who have an offense-only investments approach are left vulnerable when the unexpected occurs,” Roberts said. “But plans that combine both investments and insurance products are built for offense and defense. They instill more confidence and are proven to deliver superior financial outcomes. This is an example where financial advisors can add a lot of value.”
Respondents were asked what “burning questions” concerned them. Their answers included:
How much money will I need to retire comfortably? 43 %
Will Social Security be there when I qualify for it? 33 %
What if inflation rises when I’m retired 30 %
Is it possible I could outlive my savings? 27 %
How can I plan for potential long-term care needs? 26 %
How will taxes impact me in retirement? 25 %
How should I budget for healthcare expenses? 21 %
Will I have enough to leave behind assets for loved ones or charitable causes I care about? 19 %
What if the stock market drops when I’m retired? 14 %
More than half (51%) of Americans think it’s somewhat or very likely they will outlive their savings, according to the study. In contrast, only 16% feel confident enough to say the prospect of outliving their wealth is “very unlikely.” Boomers are more confident than other generations: 40% think it’s very or somewhat likely they’ll outlive their savings, and 53% thinks its very or somewhat unlikely. Meanwhile, more than a third (35%) of Americans say they have not taken any steps to address that potential outcome.
On the topic of Social Security, 26% of Gen X and 27% of boomers+ say that they plan to delay receiving their benefits as long as possible to maximize their monthly benefit. Only those two groups were queried and were given three options:
As soon as I’m able to, even though my monthly benefit may be reduced: Gen X 28%, boomers+ 28%
Once I hit my full retirement age, so I qualify for my full benefit: Gen X 46%, boomers+ 45%
I plan to delay as long as possible so I can maximize my monthly benefit: Gen X 26%, boomers+ 27%
