A New Survey Reveals Americans’ Magic Number for Retirement
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A New Survey Reveals Americans’ Magic Number for Retirement

Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual

By JOSEPH DE AVILA
Thu, Oct 27, 2022 9:00amGrey Clock 2 min

The magic number to retire just went even higher.

Americans now think their households will need at least $1.25 million to retire comfortably, a 20% jump from a year ago, according to a survey released Tuesday by financial services company Northwestern Mutual.

While Americans say they will need more money after they retire, the average amount in a retirement savings account has dropped this year to $86,869, an 11% decline from 2021, the survey said.

The expected retirement age also ticked up to 64 years of age, compared with 62.6 last year.

Christian Mitchell, chief customer officer at Northwestern Mutual, said rising inflation and volatility in financial markets are weighing on people’s mind-sets. That is changing people’s expectations around how much savings they will need for retirement, he said.

The survey, which polled 2,381 American adults in February, comes as consumers have been squeezed by rising inflation. That has put pressure on their spending power and their ability to save.

Stock and bond markets have also fallen sharply this year. A typical 60/40 portfolio, where investors put 60% of their money into the stock market and 40% of their money into bonds, is on track to deliver its worst returns in 100 years as of mid-October, according to Bank of America.

As inflation has surged, the federal government has taken steps to try to mitigate the pain for retirees and investors.

The government increased Social Security checks by 8.7% for 2023, the largest cost-of-living adjustment to benefits in four decades. The Internal Revenue Service also made inflation adjustments for 401(k) savings accounts, increasing contribution limits by $2,000 to $22,500 for 2023. About 60 million American workers have 401(k) plans, according to the Investment Company Institute.

The Northwestern Mutual survey found that many Americans are worried about their prospects for retirement. About four in 10 people said they don’t think they will have enough money when they retire. Nearly half of the people surveyed also said they can envision scenarios where Social Security no longer exists.

The amount of money a household will need to retire depends on many variables, including where people live and their standard of living, Mr. Mitchell said. Whether a person expects to care for parents or children in retirement are also factors to consider, he said.

“The $1.25 million for some households, that may be right, it might be too high, it might be too low,” Mr. Mitchell said.

The Covid-19 pandemic has also shaken up retirement plans for Americans. About one in four people said they now plan to retire later because of the pandemic, the survey said. Of those who are putting off retirement, 59% said they wanted to work more to save money. And 45% said they were worried about rising healthcare costs or had unexpected medical costs.

But about 15% of people said they planned to retire early because of the pandemic.



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Why Prices of the World’s Most Expensive Handbags Keep Rising

Designers are charging more for their most recognisable bags to maintain the appearance of exclusivity as the industry balloons

By CAROL RYAN
Tue, Mar 5, 2024 3 min

The price of a basic Hermès Birkin handbag has jumped $1,000. This first-world problem for fashionistas is a sign that luxury brands are playing harder to get with their most sought-after products.

Hermès recently raised the cost of a basic Birkin 25-centimeter handbag in its U.S. stores by 10% to $11,400 before sales tax, according to data from luxury handbag forum PurseBop. Rarer Birkins made with exotic skins such as crocodile have jumped more than 20%. The Paris brand says it only increases prices to offset higher manufacturing costs, but this year’s increase is its largest in at least a decade.

The brand may feel under pressure to defend its reputation as the maker of the world’s most expensive handbags. The “Birkin premium”—the price difference between the Hermès bag and its closest competitor , the Chanel Classic Flap in medium—shrank from 70% in 2019 to 2% last year, according to PurseBop founder Monika Arora. Privately owned Chanel has jacked up the price of its most popular handbag by 75% since before the pandemic.

Eye-watering price increases on luxury brands’ benchmark products are a wider trend. Prada ’s Galleria bag will set shoppers back a cool $4,600—85% more than in 2019, according to the Wayback Machine internet archive. Christian Dior ’s Lady Dior bag and the Louis Vuitton Neverfull are both 45% more expensive, PurseBop data show.

With the U.S. consumer-price index up a fifth since 2019, luxury brands do need to offset higher wage and materials costs. But the inflation-beating increases are also a way to manage the challenge presented by their own success: how to maintain an aura of exclusivity at the same time as strong sales.

Luxury brands have grown enormously in recent years, helped by the Covid-19 lockdowns, when consumers had fewer outlets for spending. LVMH ’s fashion and leather goods division alone has almost doubled in size since 2019, with €42.2 billion in sales last year, equivalent to $45.8 billion at current exchange rates. Gucci, Chanel and Hermès all make more than $10 billion in sales a year. One way to avoid overexposure is to sell fewer items at much higher prices.

Many aspirational shoppers can no longer afford the handbags, but luxury brands can’t risk alienating them altogether. This may explain why labels such as Hermès and Prada have launched makeup lines and Gucci’s owner Kering is pushing deeper into eyewear. These cheaper categories can be a kind of consolation prize. They can also be sold in the tens of millions without saturating the market.

“Cosmetics are invisible—unless you catch someone applying lipstick and see the logo, you can’t tell the brand,” says Luca Solca, luxury analyst at Bernstein.

Most of the luxury industry’s growth in 2024 will come from price increases. Sales are expected to rise by 7% this year, according to Bernstein estimates, even as brands only sell 1% to 2% more stuff.

Limiting volume growth this way only works if a brand is so popular that shoppers won’t balk at climbing prices and defect to another label. Some companies may have pushed prices beyond what consumers think they are worth. Sales of Prada’s handbags rose a meagre 1% in its last quarter and the group’s cheaper sister label Miu Miu is growing faster.

Ramping up prices can invite unflattering comparisons. At more than $2,000, Burberry ’s small Lola bag is around 40% more expensive today than it was a few years ago. Luxury shoppers may decide that tried and tested styles such as Louis Vuitton’s Neverfull bag, which is now a little cheaper than the Burberry bag, are a better buy—especially as Louis Vuitton bags hold their value better in the resale market.

Aggressive price increases can also drive shoppers to secondhand websites. If a barely used Prada Galleria bag in excellent condition can be picked up for $1,500 on luxury resale website The Real Real, it is less appealing to pay three times that amount for the bag brand new.

The strategy won’t help everyone, but for the best luxury brands, stretching the price spectrum can keep the risks of growth in check.

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