Americans Average Retirement Savings by Age, and What They Think They’ll Need
On average, Americans have less than $89,000 saved for retirement. They think they’ll need $1.46 million. The 2024 Northwestern Mutual Planning & Progress study finds a widening gap between what people have and what they think they will need.
“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,” says Aditi Javeri Gokhale, chief strategy officer, head of institutional investments and president of retail investments at Northwestern Mutual. “Inflation is expanding our expectations for retirement savings and is putting the pressure on the ability to plan and stay disciplined.”
While the average of what people think they’ll need across America is $1.46 million, a look at the average retirement savings by age shows many people think they’ll need even more.
Average Retirement Savings by Age
How much do I need to save to get to $1.46 million?
The figure $1.46 million might seem like a big number—because it is. But it’s an attainable number. The key to getting there is saving consistently over time. The younger you start, the better—thanks to the power of compound interest.
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How much do I need in retirement savings?
So how do you stack up with the average? Perhaps a little ahead—or maybe a bit behind? The reality is that it doesn’t really matter. That’s because the amount you need to save is unique to you. Your need will be based on what your retirement might cost. Here are three questions to ask yourself.
What do you want to do in retirement?
Are you planning to travel the world in style or stay close to home and babysit the grandkids? These are two very different visions with different price tags. Give this one some thought. And if you have a spouse or partner, have this conversation together.
When do you plan to retire?
Are you the type of person who can’t wait to leave work behind? Or do you love your job and could see yourself working forever? Retiring earlier is great, but it also means you’ll have a longer time to live off your savings.
How long will you live?
No one knows the answer to this question. But the reality is that if you’re in poor health and don’t expect to live as long, you may not need as much in savings as someone who is in great health. But it’s always a good idea to plan for the risk that you will live longer than you expect.
How to get the most from your retirement savings
Just saving consistently for retirement is great.
But a little strategy around how and where you save can help you make your money work harder. That’s because using a range of financial options can help you grow your wealth while also protecting you from common risks like taxes, market volatility, inflation, and even the risk that you will live longer than expected.
Related video: 6 Risks That Can Impact Your Retirement
Retirement savings options that can help you minimize retirement risks
Traditional 401(k) or IRA: These accounts allow you to save for retirement without paying taxes on the money you save until you get to retirement. But that’s the rub: You will owe tax when you withdraw money from the accounts in retirement. And you will eventually be required to withdraw this money and pay taxes on it.
In retirement, your 401(k) or similar accounts can help protect against inflation. Because these accounts typically include market-based investments and get favorable tax treatment, they can help your money grow over time and will help protect you from inflation.
Roth accounts: Roth accounts are offered as IRAs or 401(k)s, but they are taxed differently. You’ll pay tax today on funds you contribute but generally will not pay taxes on the contributions again.
Your Roth account can help with taxes and inflation in retirement. The investments in your Roth account have the potential to continue to grow, helping to protect against inflation, and distributions are tax-free (after you turn 59½). Using a mix of Roth and traditional accounts can help you manage your taxes, both as you’re saving for retirement and when you withdraw funds in retirement.
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Traditional investments: These could be investments over and above what you have contributed to tax-advantaged accounts such as 401(k)s and Roths. While 401(k)s and Roths have rules about how much you can contribute and when you can use your savings, there are no such rules with traditional investments, which can make them more flexible.
Traditional investments can help with inflation. On any given day, markets are volatile. But over time, stocks, bonds and other investments have the potential to provide long-term growth. That’s important to a retirement plan because you’ll want to give yourself a raise over the course of what could be a 20- or 30-year retirement.
Whole life insurance: When you’re saving for retirement, it’s common to have a need for a death benefit to protect your family. Whole life insurance can help cover this need while also allowing you to accumulate cash value that can become an important part of your retirement plan. That’s because the cash value is guaranteed to grow and is unaffected by the markets.
Whole life insurance provides a legacy and can help protect against market volatility. Your accumulated value is essentially like another cash reserve (that’s likely to grow more than money sitting in a checking account) because you can access it during down markets. In addition, the death benefit that never expires will allow you to be more deliberate about your legacy.
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Guaranteed income: This is money from Social Security, pensions or income annuities. We call it guaranteed because in retirement, it comes to you on a regular basis no matter how long you live and is unaffected by the market.
Guaranteed income protects against longevity risk and market volatility. Guaranteed income won’t be affected by market volatility, and it helps protect you from running out of money in retirement should you live longer than you expect.
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Using a range of financial options can take you farther
While many people think first of investments for retirement, investments alone will get you only so far. Independent research found that a comprehensive retirement plan that includes a balanced mix of investments, life insurance and an annuity can help you get higher income and leave more behind than will a plan with investments alone.
Northwestern Mutual financial advisors are experts at getting to know you and what’s important to you. Based on that knowledge, they can build a financial plan that leans on a range of financial options to give you greater confidence that you’re on track to reach your goals—even if life doesn’t go entirely as planned.
Let’s build your retirement plan.
Our advisors know what risks to watch out for so you can feel confident you'll live the retirement you want.
Get startedThis publication is not intended as tax advice. Financial representatives do not render tax advice. Consult with a tax professional for legal or tax advice that is specific to your situation.
All investments carry some level of risk, including loss of principal invested.
The primary purpose of permanent life insurance is to provide a death benefit. Using permanent life insurance cash value to supplement retirement income will reduce the death benefit and may affect other aspects of the policy.
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