How much do you need in your 401(k) for a comfortable retirement? The new 'magic number' is well over $1million

The 'magic number' that Americans think they need to retire comfortably has surged to an all-time high - while the amount they have saved is dwindling, a new report reveals. 

US adults believe they need $1.46 million for a comfortable retirement, according to a survey by Northwestern Mutual.

This is a 15 percent increase on the $1.27 million reported last year - far outpacing the rate of inflation. 

Over the course of five years, this 'magic number' has jumped a huge 53 percent from the $951,000 target Americans reported in 2020. 

But as the amount Americans suspect they will need in their later years has grown, the amount they actually have saved in their nest egg has not kept up. 

The average nest egg in the US has dropped from $89,300 in 2023, and is more than $10,000 off the five-year peak of $98,800 during the Covid-19 pandemic in 2021

US adults believe they need $1.46 million for a comfortable retirement, according to a survey by Northwestern Mutual

The average American has just $88,400 in their retirement pot today, the study found - a monumental $1.37 million less than the target. 

The average nest egg has dropped from $89,300 in 2023, and is more than $10,000 off the five-year peak of $98,800 during the Covid-19 pandemic in 2021.

'In 2023, the soaring cost of eggs in the grocery store symbolized inflation in America. In 2024, it's nest eggs,' said Aditi Javeri Gokhale, chief strategy officer, president of retail investments and head of institutional investments at Northwestern Mutual. 

'People's "magic number" to retire comfortably has exploded to an all-time high, and the gap between their goals and progress has never been wider.'

In order to reach the latest retirement savings goal, the study revealed, an American aged 50 would need to start saving $4,586 a month. 

A 40-year-old, meanwhile, would need to put away $1,792 a month, a 30-year-old would need to save $805, and someone aged 20 would need to put aside $382 a month.  

The study found there is a large gap between what people think they will need to retire and what they have saved to date across all generations.

In 2024, more than four million Americans will turn 65 - the largest surge of people in the US hitting the traditional retirement age in history. 

But among the generations closest to retirement, there is still a gap between retirement goals and reality, laying bare a growing retirement crisis in the US.

The study found there is a large gap between what people think they will need to retire and what they have saved to date across all generations

Boomers, on average, have $120,300 saved for retirement - $870,000 off their target of $990,000.

Gen X, meanwhile, have $108,600 in their nest eggs - a huge $1.45 million off the $1.56 million they think they need for a comfortable retirement. 

Millennials are also $1.59 million off their retirement target, while Gen Z, the youngest generation in the survey, are $1.61 million off their goal. 

However the study found the hope among Gen Z is that by starting to save sooner, they will be able to retire earlier. 

They typically expect to retire at 60, and say they started saving for their later years at aged 22 - almost a decade before the average American, who said they started saving at 31. 

It comes after billionaire CEO Larry Fink said one of the options to avoid a 'retirement crisis' in the US could be Americans working past the age of 65. 

'No one should have to work longer than they want to. But I do think it's a bit crazy that our anchor idea for the right retirement age - 65 years old - originates from the time of the Ottoman Empire,' the Blackrock CEO wrote in his 2024 letter to shareholders. 

Larry Fink, boss of the world's largest money manager Blackrock, thinks Americans might need to workover the age of 65 to avoid the Social Security system collapsing.

However Teresa Ghilarducci, an economist at the New School for Social Research, told The Wall Street Journal that this rising 'magic number' reveals more about retirement anxiety than retirement planning. 

She said that while $1.46 million may make sense as a retirement goal for higher-income households, many people would need far less and may be overestimating quite how large their nest egg should be.

'Anxiety about retirement is sky-high,' she said.

Kurt Rupprecht, partner and private-wealth adviser at K Street Financial, told the outlet that the size of the nest egg you need depends on a variety of factors.

This includes your income, marital status, whether you plan to pass money onto any heirs, where you plan to live in retirement and how long you are likely to live for. 

But there are some guidelines and rules of thumb to measure your retirement readiness. 

Fidelity Investments, for example, suggests saving 10 times your annual salary by age 67.

For example, a household with approximately the median income of $75,000 would need to have $750,000 saved by age 67.