Americans’ expectations for a comfortable retirement have shifted downward in 2025, with the so-called “magic number” falling to $1.26 million, according to a new study by Northwestern Mutual. That’s a $200,000 decline from last year’s estimate, reflecting a partial retreat in inflation—but it still far exceeds what most people have saved.
The figure, which remains consistent with expectations from 2022 and 2023, suggests a more cautious but still ambitious financial outlook for retirement. Experts advise replacing 80% of pre-retirement income annually, yet most households remain far from reaching this goal.
A Persistent Savings Gap
The average U.S. household earns about $80,000 annually, which means achieving the $1.26 million target would require saving more than 15 times the average income. Alarmingly, only 9% of Americans have reached 10 times their salary in savings—a common benchmark for financial readiness.
“There’s a significant gap,” said John Roberts, Northwestern Mutual’s chief field officer. More than half of Americans (51%) fear they’ll outlive their savings, and 35% have taken no steps to prevent it. Just 16% feel confident they won’t run out of money in retirement.
One in four respondents reported having only a year or less of their income saved, further highlighting the disparity between retirement goals and actual preparedness.
“Peak 65” and Rising Costs
The study comes at a time when the U.S. is experiencing a demographic shift. More than 10,000 people turn 65 each day, a trend expected to continue through 2027 in what analysts call “Peak 65.” As longevity increases, so too do retirement costs—especially for healthcare. A 65-year-old retiring in 2024 can expect to spend an estimated $165,000 on medical expenses alone, according to Fidelity.
The average American begins saving for retirement at age 31 and hopes to retire by 65. But generational differences are emerging.
Generational Divide in Savings Habits
Generation Z (born 1997–2012) is charting a different course. They start saving by age 24, plan to retire at 61, and over a third believe they’ll live to 100. Baby boomers (born 1946–1964), by contrast, began saving at 37, plan to retire around 72, and are less optimistic about longevity.
But the most strained generation appears to be Generation X (born 1965–1980). As the first cohort to retire without widespread pension support, they’re struggling to bridge the savings gap. Only 6% of Gen X have saved 10 times their income, and more than half say they won’t be financially ready for retirement.
Over half (56%) of Gen X say they’ll need to work during retirement due to financial necessity, compared to 40% of all Americans.
Lingering Concerns: Inflation and Social Security
While healthcare costs remain a burden, Americans are more focused on inflation and Social Security. One-third (33%) of respondents cited uncertainty over Social Security’s future as a top concern, while 30% pointed to inflation’s impacton their retirement income.
Despite these concerns, Roberts noted signs of optimism—particularly among younger savers. “Gen Z is on a positive path—they’re saving more, investing earlier, and open to broader wealth-building strategies,” he said.
