New Study Reveals Americans' Retirement Goals and Offers Tips to Calculate Your Own 'Magic Number.'

New Study Reveals Americans' Retirement Goals and Offers Tips to Calculate Your Own 'Magic Number'

Summary: A recent study by Northwestern Mutual has found that Americans have a specific "magic number" in mind regarding their retirement savings—$1.27 million. This figure has increased from $1.25 million last year. The study surveyed 2,740 adults online between February and March. Respondents in their 50s expected to need the highest amount, over $1.5 million, while those in their 60s and 70s anticipated needing less than $1 million.

How much do U.S. adults think they need to save for retirement?

And the average amount they currently have saved.

Table: Gabriel Cortes / CNBCSource: Northwestern Mutual online survey of 2,740 U.S. adults conducted Feb. 13–March 2, 2023

With rising inflation, it's understandable that retirement expectations have increased. However, regardless of the specific dollar amount, the main goal should be to have the mentality of feeling financially secure throughout retirement.

Insufficient Savings and Adjusted Retirement Plans: Despite their retirement goals, respondents' current savings fell significantly short of their targets. On average, individuals saved only $89,300 for retirement, a 3% increase from the previous year. Even those closest to retirement had slightly higher savings, with an average of $110,900 for people in their 50s, $112,500 for those in their 60s, and $113,900 for those in their 70s. As a result, older age groups have adjusted their retirement expectations downward and plan to work longer. The survey revealed that Americans now plan to retire at age 65 on average, up from 64 the previous year and 62.6 in 2021. Baby boomers expect to work until age 71, while Gen Xers, millennials, and Gen Z anticipate retiring at ages 65, 63, and 60, respectively.

Concerns and Strategies for Retirement Planning: Declining health emerged as the biggest worry for retirement, followed closely by outliving savings and boredom. Another survey conducted by Cerulli Associates found that the top concern for retirement savers and retirees alike is the fear of outliving their money. To overcome the overwhelming task of saving for retirement, financial advisors suggest determining your income needs instead of focusing on a specific savings target. You can estimate your annual budget by evaluating your expenses using credit cards and bank statements. For example, multiplying this budget by a factor of 25 can give you a rough idea of the lump sum you may need for retirement. Cutting back on expenses can also reduce the required savings amount.

Financial advisors suggest breaking down retirement goals into smaller, manageable steps. This could involve tracking your budget more diligently by using a debit or credit card for at least one month or setting a savings challenge to save a certain amount within three months. Taking on these smaller tasks can alleviate the pressure of saving a large sum and develop positive long-term financial habits.

Additionally, it's crucial to consider different expense categories in retirement planning. Mundane costs such as utilities and property taxes must be covered regardless of market fluctuations. Discretionary expenses, like vacations, can be reduced during economic downturns. Aspirational spending, such as special events or celebrations, should also be factored into retirement plans. The ideal scenario has sufficient guaranteed zero-risk income to cover essential expenses. Social Security benefits can contribute to monthly income, and annuities are another option. Individuals may be more comfortable taking on additional investment risk in their portfolio by ensuring that guaranteed expenses are covered.

Please click on the provided links to access our financial calculators and discover the following:

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We recommend seeking the guidance of a reliable financial advisor from Duncan Williams Asset Management (DWAM) to strengthen your retirement plan. Feel free to reach out to us at 901-435-4250 for assistance.

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