The ‘Magic Number’ Americans Say You Need To Retire in 2025 Is Less Than Last Year
Written by
Gabrielle Olya
Edited by
Molly Sullivan
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For a long time, $1 million was considered the “magic number” for your retirement nest egg, but as costs have increased, that number has too. However, the average American now believes they need less money for a comfortable retirement than they did a year ago.
According to the latest Northwestern Mutual Planning & Progress Study, U.S. adults believe they need $1.26 million saved for a comfortable retirement. In 2024, the average American believed they needed $1.46 million.
Here’s a closer look at why Americans believe $1.26 million is the sweet spot, why expectations have changed over the past year and how you can successfully build a seven-figure nest egg.
Is $1.26 Million Needed for a Comfortable Retirement?
Although Americans have tempered expectations compared to 2024, $1.26 million is still a sizable nest egg. For some people, this may be an accurate estimate of what their savings goal should be, but some will need less — and some will need more.
“Whether that amount is good or bad depends on the individual and their circumstances,” said Creg Canalizo, a financial advisor at Northwestern Mutual based in Irving, Texas. “The amount you might need is heavily influenced by the lifestyle you envision once retired. Those planning to travel extensively or engage in expensive hobbies may need more than $1.26 million, while others with modest expectations might require less.”
Canalizo noted that many Americans will realistically need $1 million-plus to fund a comfortable retirement.
“With life expectancy increasing, retirees may need to fund up to 30 years of retirement — maybe even more,” he said. “And with rising healthcare costs, it’s essential to consider these expenses when estimating the necessary retirement savings.”
However, everyone’s needs will be different.
“While $1.26 million might be a solid benchmark, personal planning should account for individual goals, health considerations and other income sources,” Canalizo said. “If Social Security benefits come into play, it can impact how much individuals need to save.”
Why Has the ‘Magic Number’ Decreased Since 2024?
Shifts in economic and personal circumstances may explain why Americans now believe you need less money saved to retire compared to a year ago.
“Volatility in the markets could lead to anxiety about retirement savings, prompting people to reassess their needs based on lower returns or economic uncertainty,” Canalizo said. “Also, inflation can make people feel they need less saved if they expect a lower standard of living or if they’re adjusting their retirement timelines. People may now prioritize experiences over material wealth, leading them to believe they need less money saved.”
Many Americans Are Far Short of Having the ‘Magic Number’ in Savings
Even if Americans think they need $200,000 less to retire comfortably than they did a year ago, many are still falling short of their $1.26 million goal. Among Americans who have retirement savings, 25% say they have just one year or less of their current annual income put aside for it, the study found.
“Many of my new clients are nowhere near where they want to be when it comes to retirement,” Canalizo said. “Reasons vary, whether it’s changing their habits on spending or saving, increasing their knowledge on where or how to invest, or adjusting to rising costs of living. My job as a financial professional is to help clients create a plan that address each of these and create room to build the retirement they dream of.”
If you’re currently aiming for a seven-figure nest egg, there are steps you can take to make that dream a reality.
“The earlier you start saving for retirement, the better,” Canalizo said. “Compound interest from regular contributions can significantly grow your retirement savings.”
To start, Canalizo recommended taking advantage of your company’s 401(k) match, if available.
“Take full advantage by investing up to the maximum amount,” he said.
It’s also important to have liquid cash available to serve as an emergency fund.
“Have enough money in emergency savings — around three to six months of expenses — to ensure you’re able to handle any sudden expenses,” Canalizo said.
Finally, he recommended working with a financial professional.
“Having a partner to create a financial plan tailored just for you will prepare you that much more for the retirement you seek to have,” Canalizo said.
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