Here's What Americans Think They'll Need for Retirement
Our guide to saving for retirement will help you answer common questions and show you strategies you can put in place today to give your retirement planning a boost.
Key takeaways:
Americans think they need $1.26 million to retire comfortably, but many aren’t saving enough.
More than half of Americans think it’s somewhat or very likely they will outlive their savings.
A mix of financial tools like 401(k)s, IRAs, Roth accounts, whole life insurance, or other sources of guaranteed income can help you prepare for retirement.
On average, Americans think they’ll need $1.26 million saved to retire comfortably. That’s according to the 2025 Northwestern Mutual Planning & Progress study, which also found that people aren’t confident that they will have saved enough.
More than half (51 percent) of Americans think it’s somewhat likely or very likely that they’ll outlive their savings, according to the study. Only 16 percent of Americans feel confident enough to say that it’s “very unlikely” they’ll outlive their savings.
“A majority of the population believes outliving their life savings is a real possibility, and the vast majority are living with financial anxiety,” said John Roberts, chief field officer at Northwestern Mutual.
Despite concerns over not having enough, some people haven’t gotten started on saving for their retirement. The study found that more than a third (35 percent) say they have not taken any steps toward addressing a gap in retirement savings.
How much do I need to save to get to $1.26 million?
A total like $1.26 million might seem like a big number—because it is. But it’s attainable for many people. The key to getting to a goal is saving consistently over time. The younger you start, the better—thanks to the power of compound interest.
The amount you need to save each month to reach your goal at retirement depends on the expected annual return rate of your investments.
To give you a starting point, let’s say you’ll get a seven percent return on your retirement savings each year. (Of course, the actual return rate will vary.) If you’re 35 years from retirement, you’ll need to invest about $330 each month to reach your goal. But if you don’t get started until you’re 15 years from retirement, you’ll need $3,958 every month to get there.
Want more? Get financial tips, tools, and more with our monthly newsletter.
How much do I need in retirement savings?
While averages are interesting, the amount you actually need to save is unique to you. Your need will be based on what your retirement might cost. To determine how much you need, here are three questions to think about and discuss with your advisor:
What do you want to do in retirement?
Maybe you’re planning to travel the world in style or stay close to home and babysit the grandkids. These different visions come with different price tags. Give this one some thought. And if you have a spouse or partner, have this conversation together. Your Northwestern Mutual financial advisor can help you chart your course to the retirement you want.
When do you plan to retire?
Perhaps you can’t wait to leave work behind or transition to “work optional” phase of life. On the other hand, maybe you love your job and could see yourself working forever. Retiring earlier is great, but it also means you’ll need your savings to last longer. Talk with your financial advisor about when you’re thinking of retiring and what an early (or late) retirement could do to your plans.
How long will you live?
No one knows the exact answer to this question. But the reality is that if you’re in poor health and don’t expect to live as long, you may not need as much in savings as someone who is in great health and seems likely to live to age 100. But it’s a good idea to plan for the risk that you’ll live longer than you expect so that you have enough savings to support a fulfilling retirement.
Get the most from your retirement savings
Saving consistently for retirement is great. But a little strategy around how and where you save can help you make your money work harder. That’s because using a mix of financial tools can help you grow your wealth while also protecting you from common risks like taxes, market volatility, inflation—and even a risk that you will live longer than expected.
Related video: 6 Risks That Can Impact Your Retirement
Financial tools that can help you minimize retirement risks
Traditional 401(k) or IRA
These accounts allow you to save for retirement without paying taxes on the money you save until you get to retirement. (And you’ll generally get a tax deduction for your contributions made today.) But that’s the catch: You’ll owe tax when you withdraw money from the accounts in retirement. And you’ll eventually be required to withdraw this money and pay taxes on it.
In retirement, your 401(k) or similar tax-deferred accounts can help protect against inflation. Because these accounts typically include market-based investments and get favorable tax treatment, they can help your money grow over time.
Roth accounts
Roth accounts are offered as IRAs or 401(k)s, but they are taxed differently than other retirement accounts. You’ll pay tax today on funds you contribute but generally will not pay taxes on any withdrawals once you turn 59 ½ .
Your Roth account can help with taxes and inflation in retirement. The investments in your Roth account have the potential to continue to grow, helping to protect against inflation. Contributions can always be withdrawn tax-free, and any growth can be withdrawn tax-free after you turn 59½ (as long as you’ve had the account for at least five years). Using a mix of Roth and traditional accounts can help you manage your taxes, both as you’re saving for retirement and when you withdraw funds in retirement.
Traditional investments
These could be investments over and above what you have contributed to tax-advantaged accounts such as 401(k)s and Roth accounts. While 401(k)s and Roth accounts have rules about how much you can contribute and when you can use your savings, there are no such rules with traditional investments—which can make them more flexible.
Traditional investments can help with inflation. On any given day, markets are volatile. But over time, stocks, bonds and other investments have the potential to provide long-term growth. That’s important to a retirement plan because you’ll want to give yourself a raise over the course of what could be a 20- or 30-year retirement.
Whole life insurance
Whole life insurance is a flexible financial tool that you can use for a variety of reasons—thanks to its cash value. Cash value in a whole life policy is guaranteed to grow over time and is unaffected by the ups and downs of the markets., making it a great option for supplementing your retirement savings during a down market, if needed.
Whole life insurance provides a legacy and can help protect against market volatility. Your cash value is essentially like another cash reserve or stream of retirement income. You can access it for any reason and strategically rely on it during down markets. The death benefit never expires (as long as you stay current on your premium payments), which allows you to be more deliberate about your legacy.
Guaranteed income
This is money from Social Security, pensions or income annuities. We call it guaranteed because in retirement, it comes to you on a regular basis, like a paycheck, no matter how long you live and is unaffected by the market.
Guaranteed income protects against longevity risk and market volatility. Guaranteed income won’t be affected by market volatility, and it helps protect you from running out of money in retirement should you live longer than you expect.
A mix of financial tools can take you farther
There are several types of accounts designed to help give you an income during retirement. Each financial tool has its own pros and cons and impact on taxes in retirement.
Investments are a great start for retirement, but investments alone will get you only so far. And independent research found that a comprehensive retirement plan that includes a balanced mix of investments, life insurance and an income annuity can help you get a higher income and leave more behind compared with investments alone.
Your Northwestern Mutual financial advisor will help you determine the right mix for your goals. They’ll get to know you and what’s important to you, then help build a financial plan to put you on track toward your retirement goal. As life changes, you can adjust the plan together, giving you confidence that you’ll be prepared when retirement comes.
Let’s build your retirement plan.
Your advisor can help you take advantage of opportunities and navigate blind spots, giving you confidence that you’ll live the retirement you want.
Let’s get startedDisclosure:
This publication is not intended as tax advice. Financial representatives do not render tax advice. Consult with a tax professional for legal or tax advice that is specific to your situation.
All investments carry some level of risk, including loss of principal invested.
The primary purpose of permanent life insurance is to provide a death benefit. Using permanent life insurance cash value to supplement retirement income will reduce the death benefit and may affect other aspects of the policy.