How much do Americans think they need to save to retire? Survey finds jump from 2021
Adults in the United States are bracing for continued rising prices, and they’re anticipating needing to save more for retirement as a means to cope.
A new Northwestern Mutual survey released Oct. 25 revealed that workers anticipate they will need at least $1.25 million to retire comfortably. That’s up 20% from 2021’s survey, which found workers anticipated needing $1.05 million for retirement.
At the same time though, the survey, which included 2,381 American adults who participated in an online questionnaire between Feb. 8 and Feb. 17, found that Americans are saving less for retirement than previous years.
Average retirement savings dropped 11% in 2022, down to $86,869, the survey’s findings show. Last year, the average savings was $98,800.
The uncertainty of the last year caused by rising prices and market volatility has driven changes in savers’ behavior, according to Christian Mitchell, executive vice president and chief customer officer at Northwestern Mutual.
“We’ve also seen upticks in spending year-over-year not only as a result of inflation, but also as people have resumed a sense of normalcy in their lives following the earlier days of the pandemic,” Mitchell said in a news release about the survey. “These factors are leading many people to recalibrate their thinking about how much they’ll need to retire and how long it will take them to get there.”
Here’s what you should know about saving for retirement.
Losing faith in Social Security
The survey’s findings come after months of steep inflation. In September, prices rose 8.2% over 12 months.
Amid continued rising prices, 43% of respondents said they do not think they will be prepared for retirement when the time comes, according to the survey’s results.
Furthermore, trust in Social Security benefits is waning, the survey found.
As a result of inflation, the Social Security Administration raised 2023 benefits by 8.7%, the highest jump in over 40 years.
But despite the increase in benefits, Americans are still skeptical, according to the survey. 45% of respondents said they can imagine a time when benefits do not exist, and 33% said they expect to outlive their savings.
Americans’ concerns might be right.
According to a 2022 report from the Trustees of the Social Security and Medicare trust funds, the fund that pays retiree and survivor benefits will run out of reserves by 2034. After that, the fund will only be able to pay 77% of scheduled benefits using “continuing tax income.”
Retiring later
Americans’ anticipated retirement age also climbed in 2022, according to the survey’s results.
The average age at which respondents expect to retire is now 64 years old, up from 2021’s 62.6 years old.
The COVID-19 pandemic changed workers’ preferences for their retirement age, the survey found. A quarter of respondents said they were planning to retire later than anticipated while 15% said they were planning to retire earlier.
Making it easier to save
As inflation has continued to wreak havoc, there have been several steps taken towards easing the burden on Americans.
The Internal Revenue Service raised the limits on how much employees can contribute to their retirement savings in 2023.
The annual contribution limit will rise to $22,500, up $2,000 from the 2022 limit, the IRS said. The increase also applies to limits on 403(b) plans, most 457 plans and the Thrift Savings Plan.
The limit on annual contributions to Individual Retirement Accounts will be $6,500 next year, a $500 jump from 2022, the IRS said.
Furthermore, the IRS adjusted all seven tax brackets for 2023 and raised its standard deduction, the amount of money that taxpayers who do not itemize their deductions can subtract from their taxable income when filing taxes.
This story was originally published October 27, 2022 at 11:21 AM with the headline "How much do Americans think they need to save to retire? Survey finds jump from 2021."
