Americans expect to work longer, save more for retirement, survey shows

Americans age 18 and older anticipate they'll need $1.25 million to retire comfortably, a 20% spike since 2021.

The retirement number for American workers just shot up even as their savings went down.

Americans age 18 and older anticipate they will need $1.25 million to retire comfortably, a 20% spike since 2021, according to Northwestern Mutual’s 2022 Planning & Progress Study released Tuesday. The expected retirement age rose to 64, up from 62.6 last year.

Meanwhile, the study revealed that Americans’ average retirement savings have dropped 11%, from $98,800 last year to $86,869 this year.

“It’s a period of uncertainty for many people, driven largely by rising inflation and volatility in the markets,” Christian Mitchell, executive vice president and chief customer officer at Northwestern Mutual, said in a statement.

Mitchell added that the study revealed upticks in spending year-over-year not only as a result of inflation, but also as people regained a sense of normalcy in their lives following the pandemic. As a result, he believes many people have been forced “to recalibrate their thinking about how much they’ll need to retire and how long it will take them to get there.”

“Uncertainty is sky-high, and many people are not optimistic about the thought of retiring and naturally feel like they need to save more,” said Elaina Shemeta of Coldstream Wealth Management. “Along with market volatility, high inflation and the potential for a recession, many are concerned about whether Social Security will remain solvent. All of this makes people feel worse about their savings, earning power and job security.”

The report also finds low levels of confidence among Americans about their retirement preparedness, as well as the reliability of Social Security as a safety net. More than four in ten (43%) respondents say they don’t expect to be financially ready for retirement when the time comes, while 45% say they can imagine a time when Social Security no longer exists, according to the survey.

Longevity risk is an increasing concern, as well with one-third (33%) of Americans expecting to live to 100, and another third (33%) predicting that there’s a better than 50% chance they may outlive their savings. Simultaneously, more than one in three (36%) report that they haven’t taken any steps to address this concern.

One bit of good news, at least for members of the financial industry: The study found that working with an adviser can shave off a few working years.

“This is a really fascinating finding and one that advisors should take note of as they work with their clients,” Mitchell said in the statement. “What people prioritize goes well beyond their bottom lines. The best advisors understand their clients’ values and motivations, not just their financial situations.”

“Consumer sentiment has hit lows not seen since the early 1980s,” said Brian Baker of Baker Financial Group. “It is difficult to stay disciplined when your confidence is shaken and your account balances are trending in the wrong direction. This level of anxiety highlights the importance of leaning on a financial adviser to help investors better see the big picture and stay diligent in working toward their long-term goal.”