Here's How Much Money You Might Need to Retire

One of the biggest uncertainties for many of us is how much money we’ll need for retirement.

There are many variables, such as how long we’ll live, how much medical assistance we’ll need, and what our spending needs will be. That makes it very difficult to answer financial questions about retirement.

If you’re wondering what others think, a Northwestern Mutual survey shows that U.S. adults believe they will need $1.25 million to retire comfortably. 

That’s up 20% from a year earlier. Unfortunately, our average retirement savings last year dropped 11%, to $86,869 from $98,800.

No surprise, then, that people now expect to retire at age 64, up from 62.6 a year ago.

Inflation and Volatile Financial Markets

"It's a period of uncertainty for many people, driven largely by rising inflation and volatility in the markets," said Christian Mitchell, chief customer officer at Northwestern Mutual.

Consumer prices soared 8.2% in the 12 months through September, and the S&P 500 has slid 19% year to date.

"We've also seen upticks in spending year-over-year, not only as a result of inflation but also as people have resumed a sense of normalcy in their lives following the earlier days of the pandemic,” Mitchell said.

“These factors are leading many people to recalibrate their thinking about how much they'll need to retire and how long it will take them to get there."

Given that anticipated retirement needs exceed what people have saved, it’s no great wonder that 43% of Americans say they don’t expect to be financially ready for retirement.

A Third of Americans Expect to Live to 100

Meanwhile 33% of Americans expect to live to 100, and one-third also see a better than even chance that they’ll outlive their savings. A sizable 36% said they haven’t taken any proactive steps to deal with this problem.

That may be understandable, given that many of us have emotional difficulty dealing with our financial issues. But neglecting to do so only increases the risk of failure.

"It's one of those questions on so many people's minds -- how long should I expect to work in order to save enough for retirement?" said Northwestern Mutual’s Mitchell.

"It's really difficult to answer because there are all kinds of considerations to factor in. But too many people grapple with it in a bubble. With greater clarity you can make a more confident call, and getting professional advice can provide that clarity."

Many of us, though not all, do need a financial adviser to set us on a sensible path. So if you are one of them, now would be a good time to start looking for an adviser. Just make sure you find a good one, someone you trust.

There are many guides for this on the Internet. Here’s one: https://www.nerdwallet.com/article/investing/how-to-choose-a-financial-advisor