Expectation vs. Reality: Are You Ready for Retirement?

In our last publication, we explored income, wealth and cost of living for retirees. Now let’s turn our attention to young people’s readiness for retirement. After carefully consuming clean diets, taking Pilates classes and regularly checking in on our mental wellness, we certainly expect to live longer and happier than the previous generation. It’s a great plan—except the math is getting harder. 

According to Northwestern Mutual’s 2024 Planning and Progress Study, Americans on average expect to need $1.46 million to retire comfortably. The problem? On average, we have saved only $88,400 for retirement. That’s a gap of $1.37 million! I know what you’re thinking: They should have found a great job at an electric cooperative! 

By age group, millennials (ages 28 to 43) expect to need $1.65 million for a comfortable retirement but have saved only $62,600 for such purpose, leaving a gap of $1.59 million. If that sounds scary, think of Gen X (ages 44 to 59) whose average savings gap stands at $1.45 million with merely six to 11 working years to close catch up. 

Data also show that the gaps have only gotten wider over time for most Americans as the amount needed for comfortable retirement has increased 54% between 2020 and 2024 while the amount saved increased only 1%. As we have stressed in Solutions, many of our economic problems arise from inflation that accumulates over time. In a high-inflation period such as now, policymakers do not seek price correction but only a slower pace of price increases. By design, each generation has to pay higher prices than the previous while income increases are not commensurate with the true cost of living. 

Contrary to popular belief, our young generations are not financially irresponsible, as millennials start retirement savings at 27 and Gen Z (ages 12 to 27) at 22—compared with Gen X, who started at 31, and Boomers, who started at 37. Each generation has started saving earlier than the previous, yet is on track to be farther behind. It is only a matter of time until a new generation has to start saving as soon as they are born—or we can start prioritizing a sustainable cost of living over official growth data.