Growing up, my dad always talked about retirement. Dad talked about retirement and thought about it every day during his working life.
The goal was to retire at about 65 and head for the mountains of Colorado or the golf courses of Florida. Once her grandchildren were born, the goal changed: moving to wherever they lived.
Dad spent his entire life working towards retirement. Even as he nipped and saved, he still hasn’t hit the mark that many Americans believe they need to retire comfortably.
What Americans think they need now to retire is a pipe dream, so what does this mean for those of us still working?
A high price
A recent survey conducted by Northwestern Mutual found that Americans believe they need $1.46 million to retire comfortably. This number is up 15% from last year alone.
Perhaps most notable is that the new “magic number” is up 54% from just four years ago. As chief strategy officer at Northwestern Mutual, Javeri Gokhale explained:
“Inflation is expanding our expectations for retirement savings and putting pressure on planning and maintaining discipline.”
And who can blame the Americans? Since Joe Biden took over, everything has become more expensive, with food prices and other everyday costs skyrocketing.
Why don’t Americans believe that retirement would also cost more? Unfortunately, this new “magic number” doesn’t even come close to what Americans have saved.
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Ms. Gokhale explains:
“The ‘magic number’ for people to retire comfortably has exploded to an all-time high, and the gap between their goals and progress has never been wider.”
So how bad is it?
Be careful of the gap
The average amount Americans have saved for retirement is $88,400. According to recent census data, fewer than half of Americans have a retirement account.
According to a survey by Allianz Life, about 40% of Americans have recently dipped into their retirement savings to offset financial hardship caused by inflation. With inflation woes putting pressure on Americans’ wallets, the threat of an emergency weighs heavily.
Only 44% of Americans can afford to pay an emergency expense worth $1,000. Forget about needing new tires, unexpected medical bills, or unexpected home repairs.
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When you can’t put money aside for a rainy day, you certainly can’t put money aside for future sunny days of retirement.
So if it’s too expensive for young and middle-aged Americans to do the following:
- buy a house
- have kids
- except for a rainy day
Is it time to not only reimagine the American dream, but also the dream of American retirement?
Time to wake up
The future doesn’t look so bright for millennials like me, and Gen Z’s Social Security is expected to run out in a decade, equating to a decrease in benefits of about 23%.
For those keeping track, a decade is pretty close for us young Americans; I will be 51 and too young to retire. Life expectancy for these two groups has also increased.
Many Gen Z workers believe they will live to be 100. While it might sound ridiculous, let me introduce you to this fun statistic.
According to Pew Research, the number of Americans reaching age 100 or older will more than quadruple by 2054, bringing the number of American centenarians to 422,000.
By 2054 I will be relatively young and lively in comparison, I will be 71 years old. So, if Social Security is out of the question, in most cases pensions are long gone and retirement savings are lagging behind – how can you live on a pension for up to 35 years?
BlackRock CEO Larry Fink rightly believes that retirement will need to be rethought, writing:
“It’s no wonder that younger generations, Millennials and Gen Z, are so financially anxious. They believe that my generation – the baby boomers – has focused on their own financial well-being to the detriment of those who come after. And in case of retirement they are right.”
It’s time to rethink the American retirement dream. My husband and I plan to work into our mid-70s, as long as we are still in good health.
And yes, I think I have a good chance of making it to 90. So either I work longer hours and try harder or I pray that my lotto tickets go through this weekend.
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