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Tumbling Markets And Soaring Inflation Are Weighing On Americans’ Retirement Expectations

Derek Wolfe

Updated: October 31, 2022

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Editor’s Note:

EDITOR’S NOTE: Americans’ retirement expectations have been sinking as inflation heats up: How much might Americans today need to enjoy a cozy retirement? Try $1.25 million. That’s what many Americans think. Sadly, you can bet that soaring inflation is going to erode the value of that amount in the years to come. Retirement savings have devolved into a grim prospect over the last decade. And those retirees who weren’t prudent enough to allocate even a small portion of their portfolio to physical gold or silver may now be feeling a massive drain on their dollars. Remember that physical gold and silver are safe-haven assets. You don’t invest in them to get that fast 10-bagger growth you would in equities. Precious metals provide slow, and sometimes fast, growth. Their rise in value is really predicated on the decline of the dollar’s purchasing power—the severe impact that many retiring Americans are facing now.

Tumbling markets and soaring inflation are weighing on Americans’ retirement expectations, and the picture isn’t looking pretty.

By almost all metrics, the country’s plans for retirement are getting grimmer, according to financial services firm Northwestern Mutual’s latest research on retirement planning. Chief among the findings — which were released Tuesday — is that savers say they now believe they’ll need a whopping $1.25 million in order to retire comfortably.

That amounts to a 20% increase from 2021 and a 32% increase from February 2020 (which was pre-pandemic).

“It’s a period of uncertainty for many people, driven largely by rising inflation and volatility in the markets,” Christian Mitchell, executive vice president at Northwestern Mutual, said in a news release.

How much money do you need to retire?

Retirement can be expensive. Major costs include health care, housing, utilities and food — and that's just for the basics.

In Northwestern Mutual's poll, 52% of respondents said they didn't know how much they needed to retire comfortably. Some 17% said they anticipated needing at least $1 million. (Of all respondents, the average amount needed to retire comfortably came out to $1.25 million.)

The exact amount needed for retirementis largely case by case, but some experts suggest savers should tuck away about 10 times their annual income by the time they retire or set aside 15% of their salaries each year.

While Americans are expecting they’ll need to save eye-popping sums of money to retire, the actual amount that they’re stashing away has plummeted. Northwestern Mutual says the average nest egg for U.S. adults is now $86,869 — down 11% from $98,800 last year.

This savings conundrum has many folks losing confidence in retirement and postponing the age they bid the workplace farewell. Northwestern’s survey shows 43% of respondents say they don’t feel financially prepared for retirement, contributing to a rise in the average age they expect to retire: now 64. Last year, it was 62.6.

Northwestern’s findings are no blip. The report, based on a survey conducted in February of nearly 2,400 adults, comes after a bevy of recent research that suggests deep cracks are forming in many Americans' plans to retire.

A recent report from financial firm Schwab shows that savers say inflation is the No. 1 obstacle between them and a comfortable retirement. Similarly, research from the Nationwide Retirement Institute found that 4 in 10 workers who were 45 or older expect to push back their retirement age in hopes of stretching their dollars a little further.

Inflation, which has stubbornly stuck near four-decade highs throughout 2022, is playing a key role in these doom-and-gloom reports. Rising prices not only limit how much money people can save now, but they can also drastically increase how much retirees spend later down the road — especially when it comes to big-ticket expenses like health care.

The silver lining? Inflation is taken into account by the IRS and the Social Security Administration to help retirees and savers alike.

On Friday, the IRS announced a major bump to the amount savers can contribute to their 401(k)s (and similar employee retirement accounts) from $20,500 to $22,500, a boost of nearly 10%. Likewise, inflated prices also led to the largest cost-of-living increase to Social Security checks in 42 years.

Both of those changes go into full effect in 2023.

Originally published on

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