The cost of retirement for Americans is on the rise, with the average individual estimating they will need around $1.46 million to retire comfortably, according to a report by Northwestern Mutual’s 2024 Planning and Progress study. This figure represents a 15% increase from last year’s $1.27 million and a 53% increase from their $951,000 goal in 2020. Younger generations, such as Gen Z and millennials, expect they will need even more, with Gen Z estimating they will need around $1.63 million and millennials expecting $1.65 million.
To retire with $1.46 million at age 65, someone who earns $50,000 annually would need to set aside $759 per month if they earn a 5% annual rate of return, $414 per month if they earn a 7% annual rate of return, or $216 per month if they earn a 9% annual rate of return. These calculations assume no initial savings and do not account for unpredictable life events such as raises, promotions, layoffs, or market volatility.
Despite the high savings goal, it is important to focus on the things within one’s control, such as their savings rate. Fidelity Investments recommends a savings rate of 15%, inclusive of an employer’s match if available. Starting to save for retirement at a young age is also crucial, as the money will have more time to grow for a longer period.
In conclusion, the cost of retirement in the United States is increasing, and it is important for individuals to focus on their savings rate and start saving as early as possible to achieve their retirement goals.
