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
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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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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
Vacationers scratching their travel itch this season are sending prices through the roof. Here’s how some are making trade-offs.
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Capri Coffer socks away $600 a month to help fund her travels. The Atlanta health-insurance account executive and her husband couldn’t justify a family vacation to the Dominican Republic this summer, though, given what she calls “astronomical” plane ticket prices of $800 each.
The price was too high for younger family members, even with Coffer defraying some of the costs.
Instead, the family of six will pile into a rented minivan come August and drive to Hilton Head Island, S.C., where Coffer booked a beach house for $650 a night. Her budget excluding food for the two-night trip is about $1,600, compared with the $6,000 price she was quoted for a three-night trip to Punta Cana.
“That way, everyone can still be together and we can still have that family time,” she says.
With hotel prices and airfares stubbornly high as the 2023 travel rush continues—and overall inflation squeezing household budgets—this summer is shaping up as the season of travel trade-offs for many of us.
Average daily hotel rates in the top 25 U.S. markets topped $180 year-to-date through April, increasing 9.9% from a year ago and 15.6% from 2019, according to hospitality-data firm STR.
Online travel sites report more steep increases for summer ticket prices, with Kayak pegging the increase at 35% based on traveler searches. (Perhaps there is no more solid evidence of higher ticket prices than airline executives’ repeated gushing about strong demand, which gives them pricing power.)
The high prices and economic concerns don’t mean we’ll all be bunking in hostels and flying Spirit Airlines with no luggage. Travellers who aren’t going all-out are compromising in a variety of ways to keep the summer vacation tradition alive, travel agents and analysts say.
“They’re still out there and traveling despite some pretty real economic headwinds,” says Mike Daher, Deloitte’s U.S. transportation, hospitality and services leader. “They’re just being more creative in how they spend their limited dollars.”
For some, that means a cheaper hotel. Hotels.com says global search interest in three-star hotels is up more than 20% globally. Booking app HotelTonight says nearly one in three bookings in the first quarter were for “basic” hotels, compared with 27% in the same period in 2019.
For other travellers, the trade-offs include a shorter trip, a different destination, passing on premium seat upgrades on full-service airlines or switching to no-frills airlines. Budget-airline executives have said on earnings calls that they see evidence of travellers trading down.
Deloitte’s 2023 summer travel survey, released Tuesday, found that average spending on “marquee” trips this year is expected to decline to $2,930 from $3,320 a year ago. Tighter budgets are a factor, he says.
Too much demand
Wendy Marley is no economics teacher, but says she’s spent a lot of time this year refreshing clients on the basics of supply and demand.
The AAA travel adviser, who works in the Boston area, says the lesson comes up every time a traveler with a set budget requests help planning a dreamy summer vacation in Europe.
“They’re just having complete sticker shock,” she says.
Marley has become a pro at Plan B destinations for this summer.
For one client celebrating a 25th wedding anniversary with a budget of $10,000 to $12,000 for a five-star June trip, she switched their attention from the pricey French Riviera or Amalfi Coast to a luxury resort on the Caribbean island of St. Barts.
To Yellowstone fans dismayed at ticket prices into Jackson, Wyo., and three-star lodges going for six-star prices, she recommends other national parks within driving distance of Massachusetts, including Acadia National Park in Maine.
For clients who love the all-inclusive nature of cruising but don’t want to shell out for plane tickets to Florida, she’s been booking cruises out of New York and New Jersey.
Not all of Marley’s clients are tweaking their plans this summer.
Michael McParland, a 78-year-old consultant in Needham, Mass., and his wife are treating their family to a luxury three-week Ireland getaway. They are flying business class on Aer Lingus and touring with Adventures by Disney. They initially booked the trip for 2020, so nothing was going to stand in the way this year.
McParland is most excited to take his teen grandsons up the mountain in Northern Ireland where his father tended sheep.
“We decided a number of years ago to give our grandsons memories,” he says. “Money is money. They don’t remember you for that.”
Fare first, then destination
Chima Enwere, a 28-year old piano teacher in Fayetteville, N.C., is also headed to the U.K., but not by design.
Enwere, who fell in love with Europe on trips the past few years, let airline ticket prices dictate his destination this summer to save money.
He was having a hard time finding reasonable flights out of Raleigh-Durham, N.C., so he asked for ideas in a Facebook travel group. One traveler found a round-trip flight on Delta to Scotland for $900 in late July with reasonable connections.
He was budgeting $1,500 for the entire trip—he stays in hostels to save money—but says he will have to spend more given the pricier-than-expected plane ticket.
“I saw that it was less than four digits and I just immediately booked it without even asking questions,” he says.
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
