High inflation lengthens Americans’ target for retiring comfortably

Inflation has crept into every part of Americans’ lives, including how much they now think they need to retire comfortably: a record $1.46 million, a study released on Tuesday said. That’s a 53% surge since the $951,000 target Americans reported in 2020 and a 15% increase from last year’s $1.27 million, according to Northwestern Mutual’s 2024 Planning & Progress Study which polled 4,588 adults in January.

The jump hasn’t spurred Americans to save more, though.

The average amount that U.S. adults have saved for retirement dropped modestly to $88,400 from $89,300 in

2023, but that is more than $10,000 off the five-year peak of $98,800 in 2021, the study said. The dip in savings brings the gap between what people think they need for retirement and what they’ve saved to $1.37 million.

“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,” said Aditi Javeri Gokhale, chief strategy officer, president of retail investments and head of institutional investments at Northwestern Mutual.

“Inflation is expanding our expectations for retirement savings.”

Gaps exist for each generation

Every generation shows a large gap between what its members believe they’ll need for a comfortable retirement and the reality of what they have saved so far, the study showed.

● Gen Z expects it’ll need $1.63 million for retirement but has saved only $22,800 on average – a $1.61 million gap.

● Millennials think they’ll need $1.65 million but have saved only $62,600 on average – a $1.59 million gap.

● Gen X forecasts it’ll need $1.56 million but has saved on average $108,600 – a $1.45 million gap.

● Boomers predict they’ll need $990,000 but they’ve saved $120,300 on average – an $870,000 gap.

Even high-net wealth people registered a wide gap. They expect they’ll need $3.93 million to fund their lifestyle in retirement but on average have only $172,100 saved, the study said.

Savings tactics differ

Members of Gen Z think the early bird catches the worm. They believe that by starting to save sooner, they’ll be able to retire earlier, the study said.

“Young people today recognize the value of retirement planning and building wealth early on in life and are getting a significant head start over their parents and grandparents,” said Gokhale said.

Gen Z has, on average, started saving for retirement at age 22, nearly a decade earlier than the overall average age across generations of 31, the study said. Overall, the average age most people expect to retire is 65.

Boomers said they started saving at age 37, while Millennials began at 27 and Gen X at 31.

Gen Z expects to retire at age 60, a dozen years earlier than Boomers, four years earlier than Millennials and seven years sooner than Gen X. In addition to saving earlier, Gen Z thinks it will live longer. Three in 10 Gen Zers and Millennials expect to celebrate their centennial birthday. That’s more than the number of Gen Xers (22%) and Boomers (21%) who think they’ll see 100 years, the study said.

Optimism for a long life and fear Social Security may run out are also “pushing up expectations for retirement savings,” said Kyle Menke, founder and wealth management adviser with Northwestern Mutual’s Menke Financial. “Living a longer life is wonderful on many levels, but the challenge is to plan for it and pay for it.”

Most forget about taxes

Even though people must pay taxes through death, only 30% of Americans have a plan to minimize the taxes they pay on their retirement savings, the study said.

“Putting money into a 401(k) may not be enough to retire comfortably if the financial plan doesn’t address the impact of taxes on retirement income,” Gokhale said. “Most people don’t realize that their retirement income will likely be taxed at 20% to 30% when they withdraw and spend it. When they recognize the impact, it’s often too late for them to adjust.”

Some top strategies people use to minimize taxes, the study said, include: ● Strategically withdrawing money from traditional and Roth accounts to remain in a lower tax bracket. Money from traditional accounts is taxed as income and Roth withdrawals are tax-free.

● Making a strategic charitable donation, which is tax-deductible as long as it comes directly from a taxable account.

● Using a Health Savings Account or other tax-advantaged health care account to pay for medical expenses. Withdrawals for qualified expenses are tax-free.

Cataracts

Cataracts occur when the lens of the eye becomes cloudy.

Symptoms include blurry or dim vision, poor night vision, light sensitivity, “halos” around lights and faded colors – eventually interfering with many daily activities.

Glaucoma

All types of glaucoma damage the optic nerve, associated with increased pressure in the eye.

In people over 60, it’s the leading cause of blindness.

Symptoms can include blind spots, tunnel vision, severe eye pain, blurred vision, light halos, even nausea or vomiting.

Age-Related Macular Degeneration (AMD)

AMD affects the macula, the part of the retina responsible for sharp, central vision.

Symptoms include distorted vision, difficulty recognizing faces, straight lines appearing wavy, dark/empty areas in central vision and color perception changes.

Progression may lead to severe vision loss.

Dry eye syndrome

Aging eyes may produce fewer tears or non-lubricating tears, leading to dryness, irritation and discomfort.

Dry eye symptoms include gritty irritation, redness, stinging, blurry vision and more.

Damage to the ocular surface and scarring of the cornea can result.

Floaters and flashes

Floaters are shapes that drift across the field of vision, while flashes are streaks of light.

Occasional floaters and flashes are normal and common with agerelated changes in the eye’s vitreous gel.

But a sudden increase in their frequency/intensity could signal serious problems that require prompt medical attention.

One Senior Place is a marketplace for resources and provider of information, advice, care and on-site services for seniors and their families.

Lisa Conway is a Registered Nurse, Certified Dementia Practitioner and a Certified Care Manager for Senior Partner Care Services in Melbourne, Florida. Conway hosts a monthly seminar, “Senior Health Friday with Nurse Lisa.”

Diabetic retinopathy

People with diabetes are at risk of developing diabetic retinopathy, which damages the blood vessels in the retina and can lead to irreversible vision loss.

Symptoms include blurred vision, dark spots and impaired color vision.