Retirement ‘magic number’ jumps as Americans grow anxious about their financial futures

The “magic number” that Americans believe they need to have saved for retirement jumped from a year ago as some express anxiety about their retirement savings.

Northwestern Mutual released a study on Wednesday which found that the amount of retirement savings Americans think they need to retire comfortably rose to $1.46 million.

That figure is an increase of $200,000 from last year’s edition of the report and is in line with the estimated magic number from 2024, the firm noted.

“The new ‘magic number’ reflects a convergence of factors – from persistent inflation and longer life expectancies to uncertainty about the future of Social Security,” said John Roberts, chief field officer at Northwestern Mutual. 

TRUMP ADMIN PROPOSES OPENING 401(K)S TO PRIVATE EQUITY, CRYPTO

For Americans with a relatively high net worth, defined as having $1 million or more in investable assets, the magic number is even higher at $2.67 million, on average.

“Retirement is increasingly complex, and Americans are responding by setting higher expectations for what they’ll need. What matters now is pairing those expectations with a thoughtful, comprehensive financial plan that will enable them to reach their unique goals,” Roberts said.

The report found that 46% of Americans don’t say they don’t expect they will be financially prepared for retirement, and 48% said it’s somewhat or very likely they will outlive their savings. It also found that just 23% of Americans with retirement savings said they have only one year or less of their current income set aside.

LARRY FINK CALLS FOR SOCIAL SECURITY REFORM, SAYS INVESTING A PORTION OF FUNDS COULD STRENGTHEN THE PROGRAM

The report notes that while there isn’t a universal retirement number for all Americans, Northwestern Mutual recommends that people plan to replace about 80% of their pre-retirement income.

It also detailed several other retirement rules of thumb for Americans to consider as they think about how much they should save for retirement.

The so-called “25x rule” suggests that a person should save about 25 times their expected annual savings. Using the $1.46 million “magic number” from the study, that would be sufficient to generate about $58,000 in annual retirement income, the report said.

NEW PROPOSAL WOULD CAP SOCIAL SECURITY BENEFITS AT $100K FOR WEALTHY COUPLES

Another rule of thumb is the $1,000-a-month rule, which states that for every $1,000 of desired monthly retirement spending, there should be $300,000 in savings. For example, with $1.46 million in retirement savings, it would yield about $4,800 in retirement income per month.

“These rules of thumb can certainly give Americans a ballpark estimate for their own wealth management goals. But they don’t factor in the big risks to retirement – like increasing healthcare costs or a long-term care event,” Roberts said. 

“They also don’t consider any unique estate planning goals that Americans hope to provide to the next generation,” he added, noting that developing a financial plan with an advisor can be beneficial.