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The rich may be able to retire with millions of dollars in the bank. The poor may have nothing and need to live on Social Security. This means an income that keeps them barely above the poverty level. A new study shows that Americans need $1.25 million in savings to retire. For most people, that is only a dream. To make matters worse, the number has risen 20% in the past year.
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Insurance company Northwest Mutual has released its 2022 Planning & Progress report, which includes these figures. The study also showed how this is untenable for almost everyone. The amount Americans have for retirement savings is only $86,896. People surveyed plan to retire at 64. If the problem is as bad as the data show, many of these people will need to work well into their 70s to keep an even middle-class lifestyle.
Christian Mitchell, executive vice president and chief customer officer at Northwestern Mutual commented, “It’s a period of uncertainty for many people, driven largely by rising inflation and volatility in the markets.” Inflation already has eaten away at the value of savings. People invested in the stock market may have watched the value of their portfolios drop by double-digit percentages. If the market does not recover, the sum they have when they want to stop work may be another reason people cannot retire as planned.
The situation actually could be worse than it seems. A third of the people surveyed believe they will live to be 100. That is impossible. Less than 1% of Americans live to be that old. However, the extent to which people believe this is proof of why they are so pessimistic.
As people retire later in this decade and in the 2030s, they will find that their chance to save hundreds of thousands of dollars is many years behind them. They cannot save enough money in the next few years to get even close to $1.25 million. Almost no one will have that much money when they are 64.
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Flywheel Publishing has partnered with CardRatings for our coverage of credit card products. Flywheel Publishing and CardRatings may receive a commission from card issuers.
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