This is how far Americans are from reaching their retirement goals
More Americans are taking retirement planning into their own hands, but they’ll likely never reach the lofty savings goals they’ve set for themselves.
According to Vanguard, the average 401(k) balance grew by 19.1% to $134,128 in 2024—thanks to a booming stock market. But this impressive growth isn't distributed equally.
In fact, the average 401(k) balance of Americans between the ages of 45 and 54 was $168,646. Savers older than 55 had more than $244,000 saved up.
On the opposite end of the spectrum, Americans 44 and younger had accumulated between $7,351 and $91,281 in retirement savings.
But the median—a figure that’s less affected by extremely high or extremely low values—paints an even gloomier picture. According to Vanguard, Americans across all age groups carry a median 401(k) balance of just $35,286.
Whether looking at the average or the median, Americans are nowhere near reaching their retirement goals, according to a 2024 Northwestern Mutual study.
The study revealed that Americans of all ages believed they’d need, on average, a staggering $1.46 million to retire comfortably, an increase of 53.5% from 2020.
With surging inflation burned into their memories, younger Americans have much higher savings goals than their older peers.
In fact, Millennials and Gen Zers believe they’ll need at least $1.56 million to retire stress-free, while Boomers’ magic number was closer to $990,000.
The problem with inflation is that it doesn’t just disappear when workers retire. In fact, retirees worry about inflation more than anyone else.
Inflation: The new retirement stress
A new retirement survey from asset manager Schroders revealed that inflation is the biggest concern for retirees—even bigger than the need to generate additional income.
Only 44% of retirees said they felt they had saved enough for retirement, while 32% said they didn’t accumulate enough.
“Whether it’s a trip to the gas station, grocery store or pharmacy, prices in the U.S. have increased noticeably in recent years, and that is particularly challenging for retirees living on fixed income sources,” said Deb Boyden, Schroders’ head of U.S. defined contribution.
According to Bank of America’s Lauren Galvin, the inflationary spiral of the 2020s is a “useful reminder of the importance of factoring inflation’s effects” into retirement planning.
As retirees struggle with rising costs, young savers face their own challenges—namely, trying to factor the impact of inflation decades into the future.
Wealth managers don’t have a foolproof strategy for beating inflation in the long run, except that younger Americans should try to make more space in their budget for investing and compounding their returns.
Some finance experts, including Amy Blacklock, recommend factoring double-digit inflation rates into retirement planning goals.
This may sound extreme, but it could force retirement planners to bolster their savings to account for unexpected increases in the cost of living in retirement.