The ideal retirement savings target drops to $1.26 million, yet individuals feel less assured about achieving it.
Phoenix Wang | Moment | Getty Images
There has been a consistent gap between how much money savers are setting aside and their expectations for retirement needs. This year, many Americans are adjusting their retirement goals.
For 2025, the “magic number” to retire comfortably has decreased to an average of $1.26 million, down by $200,000 from last year’s reported $1.46 million, according to a recent study from Northwestern Mutual, which surveyed over 4,600 adults in January.
More from Personal Finance:
Most Americans are financially stressed from tariff turmoil
Cash may feel safe when stocks slide, but it has risks
These strategies can protect your savings from tariff volatility
“Americans’ ‘magic number’ to retire comfortably has come down,” stated John Roberts, chief field officer at Northwestern Mutual. He noted that inflation has eased, prompting people to recalibrate their expectations. The 2025 figure aligns closely with estimates from 2023 and 2022, which were $1.27 million and $1.25 million, respectively. However, Roberts emphasized that this retirement goal is still substantial and “far beyond what many people have actually saved.”
‘Magic number’ vs. average retirement balances
Last year, favorable market conditions helped elevate retirement account balances to near record highs. By the fourth quarter of 2024, 401(k) and individual retirement account balances reached their second-highest averages on record, thanks to improved savings habits and stock market gains, according to the latest data from Fidelity Investments, the nation’s leading provider of 401(k) savings plans. The average 401(k) balance was $131,700, while the average IRA balance stood at $127,534.
However, U.S. markets have experienced volatility since then. As of April 21, the S&P 500 has declined roughly 10% year-to-date, and the Nasdaq Composite has dropped over 15% in 2025. The Dow Jones Industrial Average has decreased by 8%. “The stock market in 2025 has not spared many savers,” said Winnie Sun, co-founder and managing director of Sun Group Wealth Partners in Irvine, California. “Your portfolio is likely lower than it was before the new year.”
Why retirement confidence is sinking
Even with adjusted expectations, over half (51%) of Americans in Northwestern Mutual’s study feared they might outlive their savings, while only 16% felt that outcome would be “very unlikely.” This is a decrease from a year earlier when 54% of those not yet retired believed they would be financially prepared for retirement. Currently, only about two-thirds (67%) of Americans in their planning years express confidence about their retirement prospects—a decline of 7 percentage points from last year, based on a separate retirement planning study by Fidelity.
Today’s workers largely depend on themselves for retirement security, which has negatively impacted their confidence. “Notably, the current generation of retirees could be the last to rely on predictable income sources like pensions for retirement funding,” noted Rita Assaf, vice president of retirement offerings at Fidelity Investments.
“The shift toward self-reliance for retirement savings emphasizes the importance of establishing a sound financial plan as early as possible,” Assaf added.
Retirement rules of thumb
Fidelity suggests a few essential rules for retirement planning, such as saving 10 times your earnings by retirement age and adhering to the “4% rule” for retirement income, which proposes that retirees can safely withdraw 4% of their investments annually, adjusted for inflation. Other experts argue that while there’s no single magic number for retirement savings, setting aside 15% of your pre-tax annual salary is a solid starting point.
If your retirement date is still years away, “consult with an experienced financial advisor as soon as possible to assess your future income needs and develop a strategy without delay,” Sun recommends. Conversely, if your retirement date is approaching, “ensure your emergency fund is stocked, tighten your spending, consider establishing a home equity line of credit if you have equity in your home for emergencies, explore ways to generate supplemental income while you can, and importantly, meet with an advisor to gain a comprehensive understanding of what retirement will entail for you,” Sun advised.
