Americans say they need $1.27 million to retire comfortably, survey shows

America’s new magic number is $1.27 million, according to a study.

American adults surveyed for Northwestern Mutual’s 2023 Planning & Progress Study said they will require $1.27 million to retire comfortably, up from $1.25 million last year. Meanwhile, the report showed the average amount U.S. adults have saved for retirement rose 3% to $89,300, from $86,869 in 2022.

The study said people in their 50s expect to need over $1.5 million for a contented retirement, while respondents in their 60s and 70s anticipated they would spend less, primarily because many have already entered retirement.

Those with more than $1 million in investible assets, aka high-net-worth individuals, believe they’ll need $3 million to retire happily, the study said.

Aditi Javeri Gokhale, chief strategy officer, head of institutional investments and president of retail investments at Northwestern Mutual, said the good news in the higher retirement number is that it shows Americans are serious about saving and investing, despite high inflation and market volatility.

“That is a step in the right direction and a reverse of what we saw last year, when the gap widened rather than narrowed," Gokhale said in a statement. "The challenging news is that there continues to be a big disparity between what they think they’ll need to retire and what they’ve saved to date.”

Generationally speaking, Gen Zers are the most confident they’ll be financially prepared for retirement when it arrives, the study said. Older generations, on the other hand, were more pessimistic, with more than half of Gen Xers saying they won’t be ready, and nearly half of millennials and unretired boomers admitting the same.

Elsewhere, the report showed Americans see a 45% probability that they outlive their savings. Nevertheless, a sizable 33% of respondents haven't taken any steps to address this longevity risk. That said, for those who work with an advisor, nine out of ten (89%) have taken steps to address the possibility of outliving their savings.

On average, Americans plan to work until the age of 65, up from 64 last year and 62.6 in 2021, the study showed.

On the topic of aging, the study found three in ten (28%) Americans think it's likely they'll live to be 100. However, such expectations are much higher among younger adults, with 40% of Gen Zers and millennials expecting to hit triple digits, the study said.

“The survey is consistent with the trends we are seeing among our clients. While every retiree’s situation is different, retirees' increased cost of living and longevity has many rethinking their approach to retirement from both a financial and timing perspective,” said Chad Olson, financial advisor at SageView Advisory Group. 

Sandra Cho, CEO and founder of Pointwealth Capital Management, believes that no matter how much advisors would like to simplify the formula, there is no one size fits all for retirement planning.

“Your burn rate is just as important as how much you have saved for retirement," Cho said. "The outcome is the same whether you run out of fuel or burn through it too fast — you will not make it to your destination.”