How much Americans think they need for retirement vs what they actually have saved are miles apart

There’s a huge chasm between what Americans say they’ll need in retirement and how much they actually have socked away — regardless of age.

On average, Americans estimate they should save $1.46 million for a comfortable retirement, a new Northwestern Mutual study out this week found. That’s a 15% increase over last year and a hefty 53% increase from what Americans reported in 2020.

The trouble is the average amount that US adults have saved for retirement is $88,400, down slightly from last year and more than $10,000 off since 2021.

“Many Americans believe the cost of comfortable retirement will be more expensive than ever,” John Roland, partner and private wealth advisor with Northwestern Mutual’s Beyond Financial Advisors, told Yahoo Finance. “Their ‘magic number’ for retirement savings has swelled to an all-time high.”

Gen X angst

Only about 40% of Gen Xers feel like they know how much money they will need to withdraw comfortably. That’s noteworthy as the oldest in this cohort will turn 60 next year.

“They can see their retirement years on the horizon, but their uncertainty about the future is creating a great deal of financial anxiety,” Roland said.

Gen X — those born between 1965 and 1980 — say they will need on average $1.56 million in savings to withdraw comfortably, but to date have only $109,600. Gen Z and Millennials expect to need more than $1.6 million to withdraw comfortably, but currently have $22,800 and $62,600 set aside, respectively.

More than 1 in 3 Gen X workers have dipped into their savings or taken out a loan to pay for monthly bills, according to a recent MetLife study. Nearly 6 in 10 Gen X employees expect to postpone retirement due to a financial situation, and nearly half are now more likely to say they are behind on retirement savings.

“Gen X employees, the next in line to retire, are struggling to keep up with their financial goals,” Todd Katz, head of Group Benefits at MetLife, told Yahoo Finance. “A lack of awareness and understanding may leave this cohort at a disadvantage.”

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Longevity changes the calculation

One reason those overall retirement savings forecasts jumped this year is that younger generations expect to live longer — both in general and in retirement — than older generations, Roland said.

Three in 10 millennials and Gen Z says it’s likely or highly likely that they will live to age 100, according to the report. The older crew is not so sure. Among Gen X and boomers, only 2 in 10 expect to be a centenarian.

In better news, the research found that each generation is starting to save for retirement sooner than the one before, Roland said. “Americans’ average age to start saving for retirement is 31. But Gen Z is getting a significant head start.”

Gen Z reported they started saving for retirement at 22 on average, and they expect to withdraw at age 60, per Northwestern Mutual. That’s 15 years before boomers who say they started saving when they were 37, and expect to work until they’re 72.

“Millennials and Gen X, for example, believe they’ll need $100,000 to $200,000 more than the average American to retire comfortably,” Roland said. “This is a big deal. As longevity continues to increase, it’s critical for people to examine the challenges a longer life can create and to account for those in a financial plan.”

Inertia rules

Across all generations, more than a third have not taken any steps to address the possibility of outliving their savings, such as putting together a financial plan or getting advice from a financial advisor, according to Northwestern Mutual’s data.

For instance, roughly half of Americans don’t have a plan to address healthcare costs in retirement which can easily top six figures.

And since it’s tax time, it’s worth mentioning that, strikingly, only around half of those age 43 and over have a good understanding of how taxes could impact their retirement and have factored that into their financial plans, or have a good understanding of how potential drops in the stock market could impact their retirement income.

“Most people don’t realize that their retirement income may be taxed about 20% or 30% when they withdraw and spend it,” according to Aditi Javeri Gokhale, chief strategy officer, at Northwestern Mutual. “When they recognize the impact, it’s often too late for them to adjust.”

It’s important to keep the generational trends in perspective.

“While it’s interesting and instructive to hear what others might need to withdraw comfortably, people need to remember that their long-term goals and aspirations — and their individual financial circumstances — could vary widely from someone else’s,” Roland added. His core advice: Focus on what’s important to you, set your own goals, and take action.

Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist, and the author of 14 books, including “In Control at 50+: How to Succeed in The New World of Work” and “Never Too Old To Get Rich.” Follow her on X @kerryhannon.

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