Needed Retirement Asset Expectations Are Higher in 2022

The challenges for workers to retire comfortably are coming from many sides. 

Workers estimate they will need $1.25 million, to retire comfortably, a 20% jump from 2021, new data shows.

While workers expect to need greater retirement assets, many grapple with twin contemporary challenges—lower average retirement savings and higher average expected retirement age—the Northwestern Mutual 2022 Planning & Progress Study shows.

The study finds average Americans’ retirement savings dropped 11% from last year, to $86,869 from $98,000, at the same time their expected retirement age increased to 64 from 62.6, the study shows.

Market volatility and rising inflation are top concerns affecting perceptions of retirement security for retirement plan participants, says Christian Mitchell, executive vice president and chief customer officer at Northwestern Mutual, in a press release.

“It’s a period of uncertainty for many people, driven largely by rising inflation and volatility in the markets,” Mitchell says.

Data shows low retirement confidence among many Americans is affecting their retirement preparedness, as 43% of respondents don’t expect to ever be financially ready to retire. Another 45% are concerned Social Security won’t be available to them when they are eligible.

Additionally, the Americans surveyed said they are expecting to live longer in retirement: 33% say it is likely they will live to 100-years old and 33% are predicting there is a greater than 50% chance of outliving their savings in retirement. Among survey respondents, 36% report not taking any steps to address longevity risk, the study funds.  

The survey finds that 25% said increasing savings is the most common step taken to address the possibility of outliving savings, followed by 22% that chose putting together a financial plan and 12% who said purchasing investments. Regarding other steps to address longevity risk, 18% said discussing options with family, 18% also said seeking advice from an adviser and 16% said purchasing insurance.

“We’ve also seen upticks in spending year-over-year not only as a result of inflation, but also as people have resumed a sense of normalcy in their lives following the earlier days of the pandemic,” Mitchell adds in the release. “These factors are leading many people to recalibrate their thinking about how much they’ll need to retire and how long it will take them to get there.”

The data also shows the sources of assets workers expect to live on in retirement.

Respondents expect the percentage of their 401(k) or other retirement account to deliver 27% of their overall retirement funding, Social Security, 26% and personal savings or investments, 22%.  

The study was conducted by the Harris Poll for Northwestern Mutual and included 2,381 adults age 18 or older who participated in an online survey between February 8 to 17.