How much money do you need to retire? Americans are lowering their goals

Declining inflation may be making some savers a little more confident

By Mark Huffman of ConsumerAffairs

April 15, 2025

Key Takeaways:

• The average Americans retirement magic number for 2025 is $1.26 milliondown $200K from 2024, yet still out of reach for many.

• One in four Americans with retirement savings have only one year or less of their annual income set aside.

• More than half of Americans fear outliving their savings, but over a third have taken no steps to prevent it.

As inflation cools, Americans expectations for what they need to retire comfortably are shifting, but the gap between goals and reality remains fairly wide. According to Northwestern Mutuals newly released 2025 Planning & Progress Study, the average magic number Americans believe theyll need to retire has dropped to $1.26 million. Thats a $200,000 decrease from 2024s $1.46 million estimate and roughly even with 2022 and 2023 expectations.

While this lower figure might reflect decreased anxiety over inflationwhich dropped from 6% in 2023 to around 3% in 2024, it doesnt mean people are feeling more secure. In fact, financial anxiety remains widespread.

A full 25% of Americans with retirement savings report having only one year or less of their annual income set aside. And more than half (51%) of Americans believe its at least somewhat likely they will outlive their nest egg, with only 16% saying its very unlikely.

Americans’ ‘magic number’ to retire comfortably has come downbut it remains high, far beyond what many people have actually saved, John Roberts, chief field officer at Northwestern Mutual, said in a press release. He added that peoples perceptions may be adjusting as inflation expectations settle, but concern about retirement preparedness has intensified.

Retirement savings: A generation gap

The study highlights troubling disparities in retirement readiness across generations. Generation X, many of whom are nearing retirement age, appear particularly vulnerable: 52% have saved three times their current income or less, and a majority (54%) dont believe they will be financially ready to retire.

In contrast, younger generations seem both more proactive and more optimistic. Gen Z, for instance, started saving at an average age of 24, plans to retire by 61, and over a third (34%) believe theyll live to 100. Boomers, on the other hand, began saving around age 37, expect to retire by 72, and only 23% anticipate reaching the century mark.

Gen Z is the most confident generation in terms of retirement preparedness, not surprising since they have the longest time horizon. However, they may be overlooking key aspects of financial planning.

A majority (61% of Gen Z and 60% of millennials) admit they are overly focused on investing and wealth-building while neglecting protective measures like life and disability insurancestrategies boomers are more likely to embrace.

Monthly saving goals by age

For individuals aiming to hit the $1.26 million retirement target by age 65, starting age significantly impacts required monthly contributions. Assuming a 7% annual return:

• A 20-year-old would need to save $330/month.

• A 30-year-old would need $695/month.

• A 40-year-old would need $1,547/month.

• A 50-year-old would need $3,958/month.

These figures underscore the steep cost of delayed savinga challenge for those who started late or had interruptions in their financial journey.

Northwestern Mutual recommends replacing roughly 80% of ones pre-retirement income, but stresses that retirement plans should be customized. Factors such as desired lifestyle, retirement age, and living location heavily influence individual needs.

Rules of thumb are everywhere, but nothing is better than a financial plan thats personalized and custom-built just for you, said Roberts.

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