Growing up, my dad always talked about retirement. Dad spoke about retirement and thought about it daily during his working life.
The goal was to retire at about 65 and head to either the Colorado mountains or the Florida golf courses. Once his grandchildren were born, the goal changed to moving anywhere they lived.
Dad spent his whole life working towards retirement. While he pinched and saved, he still didn’t hit the mark that many Americans believe they need to retire comfortably.
What Americans think they need now to retire is a pipedream, so what does that mean for those of us still working?
A hefty price tag
A recent survey done by Northwestern Mutual found that Americans believe they need $1.46 million to retire comfortably. That number is up 15% from last year alone.
Perhaps most notable is that the new “magic number” is up 54% from just four years ago. As chief strategy officer at Northwestern Mutual, Javeri Gokhale explained:
“Inflation is expanding our expectations for retirement savings and putting the pressure on to plan and stay disciplined.”
And who can blame Americans? Everything has become more expensive since Joe Biden took over, with grocery prices and other everyday costs skyrocketing.
Why wouldn’t Americans believe retirement would cost more as well? Unfortunately, this new “magic number” is nowhere near what Americans have saved up.
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Ms. Gokhale explains:
“People’s ‘magic number’ to retire comfortably has exploded to an all-time high, and the gap between their goals and progress has never been wider.”
So, just how bad is it?
Mind the gap
The average amount Americans have saved for retirement is $88,400. According to recent census data, fewer than half of all Americans have a retirement account.
According to an Allianz Life survey, about 40% of Americans have recently dipped into their retirement savings to make up for financial struggles brought on by inflation. With inflation woes putting the squeeze on Americans’ pocketbooks, the threat of an emergency weighs heavy.
Only 44% of Americans can afford to pay for an emergency expense with a $1,000 price tag. Forget about needing new tires, unexpected medical bills, or unanticipated home repairs.
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When you can’t put money away for a rainy day, you certainly can’t put money away for future sunny retirement days.
So, if it’s too expensive for young to middle-aged Americans to do the following:
buy a home
have children
save for a rainy day
Is it time to not just reimagine the American Dream, but also the American Retirement Dream?
Time to wake up
The future isn’t looking as bright for millennials like myself, and Gen Z. Social Security is projected to be depleted in a decade, amounting to about a 23% decrease in benefits.
For those keeping track, a decade is pretty close for us youthful Americans; I will be 51 and too young to retire. Life expectancy for these two groups has also increased.
Many Gen Z workers believe they will live to see 100. While that might sound laughable, let me introduce you to this fun statistic.
According to Pew Research, the number of Americans who will reach 100 years old or older will more than quadruple by 2054, bringing the number of American centenarians to 422,000.
By 2054, I will be relatively young and vibrant by comparison, 71 years old. So if social security might be off the table, pensions are long gone in most cases, and retirement savings are falling behind – how is someone supposed to live off of any retirement for a possible 35 years?
BlackRock CEO Larry Fink rightly believes that retirement will need to be reimagined, writing:
“It’s no wonder younger generations, Millennials and Gen Z, are so economically anxious. They believe my generation – the baby boomers – have focused on their own financial well-being to the detriment of who comes next. And in the case of retirement, they’re right.”
It’s time to rethink the American Retirement Dream. My husband and I fully expect to work into our mid-70s, provided we are still healthy.
And yes, I think I have a good shot at making it well into my 90s. So it’s either work longer and hustle harder or pray my lotto tickets pan out this weekend.
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The post Since It Now Costs $1.5 million to Retire, It’s Time To Rethink What Retirement Means appeared first on The Political Insider.
