The magic number to retire just went even higher.
Americans now think they need at least $1.25 million to retire comfortably, a 20% jump from a year ago, according to a survey released Tuesday by financial services company Northwestern Mutual.
While Americans say they will need more money after they retire, the average amount in a retirement savings account has dropped this year to $86,869, an 11% decline from 2021, the survey said.
The expected retirement age also ticked up to 64 years of age, compared with 62.6 last year.
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Christian Mitchell, chief customer officer at Northwestern Mutual, said rising inflation and volatility in financial markets are weighing on people’s mind-sets.
“These factors are leading many people to recalibrate their thinking about how much they’ll need to retire and how long it will take them to get there,” he said.
The survey, which polled 2,381 American adults in February, comes as consumers have been squeezed by rising inflation. That has put pressure on their spending power and their ability to save.
Stock and bond markets have also fallen sharply this year. A typical 60/40 portfolio, where investors put 60% of their money into the stock market and 40% of their money into bonds, is on track to deliver its worst returns in 100 years as of mid-October, according to Bank of America.
As inflation has surged, the federal government has taken steps to try to mitigate the pain for retirees and investors.
The government increased Social Security checks by 8.7% for 2023, the largest cost-of-living adjustment to benefits in four decades. The Internal Revenue Service also made inflation adjustments for 401(k) savings accounts, increasing contribution limits by $2,000 to $22,500 for 2023. About 60 million American workers have 401(k) plans, according to the Investment Company Institute.
The Northwestern Mutual survey found that many Americans are worried about their prospects for retirement. About four in 10 people said they don’t think they will have enough money when they withdraw. Nearly half of the people surveyed also said they can envision scenarios where Social Security no longer exists.
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The Covid-19 pandemic has also shaken up retirement plans for Americans. About one in four people said they now plan to retire later because of the pandemic, the survey said. Of those who are putting off retirement, 59% said they wanted to work more to save money. And 45% said they were worried about rising healthcare costs or had unexpected medical costs.
But about 15% of people said they planned to retire early because of the pandemic.
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