Americans Need to Increase Their Savings for Retirement

Americans now anticipate needing $1.25 million to fund their retirement. The retirement age has increased from 62 in 2021 to 64 this year. A recent analysis suggests that businesses should emphasize their employees’ financial wellness by providing tools and services that make it simpler to accumulate money.

A recent poll reveals that Americans anticipate retiring later than they did a year ago due to a dramatic decline in their retirement savings and shifting expectations over the amount of savings they would need to retire.

According to Northwestern Mutual’s 2022 Planning & Progress Study, the average retirement age for Americans has increased from 62 in 2021 to 64 this year. In the past year, the average retirement savings of U.S. people have decreased by 11%, from $98,800 to $86,869. Additionally, their retirement savings expectations have increased by a startling 20% to $1.25 million. The study, performed by Harris Poll via an online poll in February 2022, comprises responses from over 2,300 U.S. citizens aged 18 and older.

Nicole Stokes, managing director of Northwestern Mutual in Tampa, stated that the changes in survey responses between 2021 and 2022 occurred amid a period of uncertainty and volatility, which caused many Americans to shift their assumptions and adopt a more gloomy outlook on the future.

In the current economic climate, people are unquestionably under financial stress, said Stokes. Many find it difficult to save and amass money between inflation and market drops. This alters timeframes, forcing some to delay when they believe they will have sufficient funds for a comfortable retirement.

Approximately 43% of respondents do not anticipate being financially prepared for retirement when the time comes, and 45% can envision a future without Social Security. Meanwhile, 33% of respondents feel there is a greater than 50% risk that they will outlive their funds. Only 22% of people with this fear have developed a financial strategy in response.

Overall, 25% of respondents intend to retire earlier than anticipated before the epidemic. The top reasons for delaying retirement were:

  • The desire to continue working and preserve money (59%).
  • Concerns about growing costs include health care and unanticipated medical expenses (45%).
  • The necessity to draw into retirement funds (24%).

Christian Mitchell, Northwestern Mutual’s executive vice president and chief customer officer, stated it concerns many people: How long will I need to work to save for retirement? It’s tough to answer since so many factors need to be considered. But too many individuals deal with it alone. You can make a more confident decision if you have better clarity. He believes expert assistance can give you this clarity.

According to Stokes, financial advisers will play a crucial role in assisting employees through difficult times because Americans have such low levels of trust in their retirement readiness. Those that work with an advisor anticipate retiring at 61, three years earlier than the average response.

62% of respondents stated they need to improve their financial planning, while just 35% have sought the assistance of a financial professional. There are indications of improvement in this area, including the finding that 18% of respondents who did not have a consultant before the COVID-19 pandemic had either begun working with someone or wanted to do so in the future.

It’s a good moment for advisers to assist clients to retain a long-term perspective and appreciate that this is only a snapshot in their broader financial travels, Stokes said. The aim of a financial adviser is to assist customers in maintaining discipline, staying on track, and reminding them that the path to financial stability is not linear.

Stokes stated that employers must also be aware of the mentality of their team members and make further efforts to help them. It’s a chance for companies to emphasize the financial health of their employees and give tools and services that make it simpler for employees to develop lifetime good financial habits, including saving for the future, she added.