A recent study by Northwestern Mutual shows that the average American now believes they need $1.26 million to retire comfortably in 2025. This figure is slightly lower than last year’s $1.46 million target and close to the 2022 estimate. However, despite this stable number, nearly 97% of Americans fall short of this goal.
Why So Many Americans Are Behind on Retirement Savings
According to Capgemini Research, there are about 7.9 million millionaires in the U.S., representing just 3% of the adult population.
This means most Americans are not yet millionaires, and many face obstacles to saving enough for retirement. High housing costs, student loan debt, and inflation make it hard for many to save. Even those who do save often struggle to keep up with the rising expenses needed for a comfortable retirement.
Starting Early Makes a Big Difference
Time is a powerful factor in building retirement savings. For example, a 20-year-old who invests $330 monthly at a 7% annual return can reach $1.26 million by age 65. But for someone starting at 50, the monthly investment needed jumps to nearly $4,000 to hit the same target. This shows why starting early is crucial for reaching retirement goals.
Retirement Needs Vary by Individual
The $1.26 million figure is an average and might not fit everyone’s situation. For example, if your yearly expenses are high, $1.26 million may not be enough. Studies also show that many millionaires don’t feel wealthy or fully prepared for retirement.
Cost of living differences also matter. States like Alaska and New Hampshire offer lower living costs, which could reduce the amount needed to retire comfortably.
Experts recommend using retirement calculators or consulting financial advisors to set realistic, personalized savings goals. With careful planning and time, most people can work toward a secure retirement.
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