Americans Are Rethinking Their “Magic Number” for Retirement

New research suggests retirees should aim to replace 80% of their pre-retirement income to maintain their lifestyle.

The amount Americans believe they need to retire comfortably has dropped to $1.26 million—a $200,000 decrease from last year’s estimate. But even that revised “magic number” remains far beyond what most people have actually saved.

According to Northwestern Mutual’s latest study, easing inflation has slightly softened retirement expectations. Still, the $1.26 million goal aligns closely with projections from 2022 and 2023.

A Growing Gap Between Goals and Reality

While retirement needs vary based on lifestyle and geography, a general guideline is to replace 80% of pre-retirement income annually. But Americans are far from that benchmark.

In fact, the gap is widening.

• Only 9% of Americans have saved at least 10x their annual income.

• With an average U.S. household income of $80,000, the math suggests the typical goal of $1.26M equals roughly 15x income—a figure most fall short of.

And the worry is real:

• 51% of Americans believe they’re somewhat or very likely to outlive their savings.

• 35% have taken no action to prepare for that possibility.

• Only 16% feel it’s “very unlikely” they’ll outlive their wealth.

• One in four Americans who have retirement savings said they have just one year or less of their current income saved for retirement, the study found.

A Nation Approaching ‘Peak 65’

The challenge becomes even more urgent as more than 10,000 Americans turn 65 each day—a trend continuing through 2027 in what’s been dubbed “Peak 65.” “Financial anxiety is at an epidemic level. The recent market activity only raises that level of general anxiety,” Roberts said. 

Healthcare costs are a major factor. A 65-year-old retiring in 2024 will need an estimated $165,000 for healthcare and medical expenses during their retirement, according to a recent estimate by Fidelity Investments.

Meanwhile, the average American starts saving at age 31 and hopes to retire by 65. But younger generations started saving sooner, plan to retire earlier, and expect to live longer, Northwestern Mutual found. 

Generation Gaps in Retirement Planning

Gen Z (born 1997–2012) is changing the game:

• Starts saving at 24

• Plans to retire by 61

• 34% expect to live past 100

  
  

By contrast, Baby Boomers (born 1946–1964):

• Started saving at 37

• Plan to retire at 72

• Only 23% expect to reach 100

“Gen X is approaching retirement underprepared,” said Roberts. “When you look at the rule of thumb, they are well below that. It’s time for Gen X to get moving.”

But the generation under the most pressure? Gen X (born 1965–1980).

Key findings for Gen X:

• 52% have saved only 3x or less of their current income

• Only 6% have reached the 10x benchmark

• 54% believe they won’t be financially prepared for retirement

• 56% say they’ll need to work in retirement due to financial necessity

Top Retirement Concerns: Beyond Savings

While building a nest egg is critical, Americans are also deeply concerned about the future of Social Security and inflation:

• 33% worry Social Security won’t be there when they qualify.

• 30% fear inflation will erode their savings in retirement.

On a positive note, Roberts said Gen Z is on a positive path by saving more, investing more and exploring other wealth-building opportunities. 

“The optimism in that generation is higher,” Roberts said. “While some of the generations have hurdles to overcome, Gen Z is showing us a really different path.”

If you start early and take strategic steps—like leveraging smart financial strategies that allow your money to grow tax-free and be accessed tax-free—you can create a powerful legacy. Your children could have hundreds of thousands set aside by adulthood. And when it's your turn to retire, you could have 30–60% more to spend, invest, or enjoy.

The right plan makes all the difference.