Americans Have a 'Magic Number' They Need for Retirement

Americans believe they need a “magic number” to retire comfortably, far beyond what many have been able to save.

According to a study from Northwestern Mutual that polled more than 4,600 adults in January, Americans think they need $1.26 million to comfortably retire. For those aiming to retire in 30 years, the financial math to reach this goal is sobering.

To attain the $1.26 million retirement goal based on a 7 percent annual return in investments, a person would need to put away approximately $1,035 each month, which amounts to $12,420 annually. If they’re saving 15 percent of their income—a commonly recommended target for retirement savings—this would require an annual salary of around $82,800, more than $20,000 more than the national median salary of $61,984.

However, the study reveals that 25 percent of Americans have saved only one year or less of their current annual income for retirement, and over half fear they will outlive their savings. Gen Xers, who are next in line to retire after baby boomers, are particularly concerned, with 54 percent believing they will not be financially prepared when the time comes.

Why Is Retiring Getting Harder?

While commonly touted as the “golden years” of life, a comfortable retirement is becoming out of reach for plenty of Americans. In an era where the cost of living continues to outpace wages and traditional retirement structures have all but vanished, saving for retirement has transformed from a long-term financial goal into a daily struggle for many Americans.

Bobbi Rebell, CFP and personal finance expert at BadCredit.org, frames the situation starkly.

“The recent market downturn, despite its recovery, was a big reminder that retirement funding is fragile,” she told Newsweek. “It has never been easy but it has been something that Americans did not have to think about as directly in the past because many had pensions as well as family support systems in place to help control the variables.”

That foundation has steadily eroded. Gone are the days when defined benefit pensions formed a safety net for retirees. Today, most workers rely on self-directed savings plans—if they’re lucky enough to have access to them at all, Rebell explained.

“Not only have defined benefit plans like pensions become rare,” Rebell notes, “but self-directed defined contribution plans, like 401(k)s, are not available for many people who work in the gig economy. It is no wonder people feel vulnerable and are lowering their expectations when it comes to their retirement nest egg.”

Ashley Morgan, a debt and bankruptcy lawyer and owner at Ashley F Morgan Law, echoes the difficulty facing workers, especially in a volatile housing market.

“Cost of living has been steadily on the rise. Saving for retirement is difficult for many with living costs rising and retirement costs being stagnant,” she told Newsweek.

She adds that one of the most common retirement strategies—building home equity over time—is increasingly out of reach.

“Now, since younger generations are not buying properties or house prices are so high that mortgage payments are substantial, saving for retirement is not possible when you have a mortgage.”

Renters, in particular, are at a disadvantage, often facing rising housing expenses that eat into any potential savings. “With increasing rent,” Morgan explains, “it means increases in income are automatically offset, at least to a certain degree.”

Another significant challenge is the shift in employment patterns.

“Many people work for smaller companies or perform contracting jobs like gig work,” says Morgan. These jobs typically don’t offer retirement benefits, and the lack of employer matching makes it less appealing to contribute independently. Frequently changing your job also makes it difficult to accumulate long-term savings.

Then there are student loans—a burden that can linger well into what should be peak retirement savings years. While some of these borrowers have recently been protected by pandemic-era rules that stopped the collection of unpaid education debts, the Trump administration has now ordered the Department of Education to begin resuming forced collections, which can result in wage and Social Security garnishment.

“I unfortunately see people in their 60s still paying student loans, some for their own educations and some for their children,” Morgan said. “These student loans often are paid at the expense of saving for retirement.”

These compounding factors, which have made saving more difficult, also mean many are working later in life than previous generations.

A 2023 report from the Pew Research Center revealed that about one in five Americans aged 65 and older were still working, almost double the proportion from 35 years ago.

According to the Bureau of Labor Statistics, 8.2 million people over 65 were employed in February 2015. By February 2025, that number had grown to 11.1 million, marking a 35 percent increase. A recent study by Transamerica Center for Retirement Studies found that more than half of current workers—52 percent—plan to work at least part-time in retirement.

While acknowledging these challenges, Rebell does see a silver lining in the growing trend of older workers.

“The growing trend of older workers is not necessarily a bad thing. Working gives purpose and can provide an extra layer of financial security,” she said. “As people live healthier for longer lives, staying in the workforce longer makes a lot of sense.”

But for millions of Americans, working longer may not be a choice, but a necessity. With financial pressures mounting and support systems weakened, the modern retirement landscape is less a peaceful reward for years of work and more a shifting target that is becoming harder and harder to attain.