Americans have big retirement goals, with a new survey showing they think they’ll need $1.25 million in savings to see them comfortably through their golden years. The troubling reality, however, is that most people are miles from that goal, with the typical U.S. retirement account holding less than $87,000.

To be sure, the so-called retirement gap — the shortfall between the amount of money people will need in their later years and what they’ve actually spent — is a long-standing problem. But the gap between Americans’ long-term financial aspirations and the bleaker reality is widening, with many people today struggling to pay for basics like food and housing, not to mention retirement plans.

The latest distress signal is revealed in a new study by Northwestern Mutual, an annual examination more than 2,000 adults about their attitudes and behaviors toward money and financial planning. The analysis found that the typical American now expects to need $1.25 million to retire comfortably — a 20% jump from 2021. Meanwhile, the average retirement account lost 11% in value over that time, falling to $86,869 a year.

“Currently, people are experiencing a financial crisis. It’s a more challenging environment for savings, and many have seen losses in their investments and 401k portfolios,” said Tim Harrison, founder and CEO of Harrison Financial Services, Northwestern Mutual Private Client Group. , in an email to CBS MoneyWatch.

Inflation and other factors are “increasing what people estimate they will need to retire comfortably. So we’re seeing people raise the age at which they plan to retire, and more are saying they’re not sure, that they will be ready when the time comes,” he added.

The findings come as other research emerges about America’s unpreparedness for retirement. Only a quarter of current retirees earn enough to replace $7 of every $10 in pre-retirement income — a common rule of thumb for a comfortable retirement, according to a study released earlier this month by Goldman Sachs.

About half of retirees live on less than half of their retirement income, with older Americans “particularly vulnerable” to inflation and other economic trends, Goldman said.

“We have a retirement problem in the U.S.,” Greg Calnon, head of multi-asset solutions at Goldman Sachs Asset Management, said on a conference call about their findings. The US pension system has “shifted the responsibility from the employer to the employee” with the shift from pensions to 401(k)s.

How to save for a secure retirement


Workers are dealing with “very high market volatility — and longer life expectancy,” he added. “It’s a difficult mix for people to navigate.”

For retirees, the general rule of thumb is to withdraw no more than 4% of their 401(k) and other savings each year, meaning a $1.25 million retirement account would provide $50,000 in annual income. An $87,000 retirement account would provide about $3,500 annually.

A big illusion

About 4 in 10 Americans say they don’t think they’ll be ready for retirement, Northwestern Mutual found. As a result, Americans now say they plan to retire at age 64, up from 62.6 last year, the study found.

However, the actual experience of retirees shows that many Americans will not have a choice about when they retire. A Goldman survey of retirees found that 56% left the workforce earlier than they planned to. And about half said they retired for reasons beyond their control, such as health problems, job loss or the need to care for family members. The study found that only 7% said they retired because they had enough money.

Goldman experts said younger workers also need to save for retirement while juggling raising children, caring for aging parents and dealing with the rising cost of living. Such a “maelstrom of competing financial needs can derail retirement readiness,” said Mike Moran, senior retirement strategist at Goldman Sachs Asset Management. “This is the new reality for retirees.”