How Much Money Do You Need to Retire Comfortably in 2025?

Many wonder how much money they will need to save for a financially comfortable retirement. The word “comfort” is a somewhat relative term to lifestyle. Like the “Goldilocks and the Three Bears” story, what’s “just right” for some may feel like “too small” for others. Looking at things more objectively, recent research provides insights into general expectations and realities.

America’s Retirement Savings Expectations

Northwestern Mutual’s 2024 Planning & Progress Study found that U.S. adults believe they will need approximately $1.46 million to retire comfortably. This figure represents a 15% increase from the previous year’s $1.27 million and a whopping 53% escalation from 2020’s figure of $951,000. A breakdown by generation reveals the following:

• Gen Z: estimate needing $1.63 million
• Millennial: estimate needing $1.65 million
• Gen X: estimate needing $1.56 million
• Boomers: estimate needing $990,000

Whether these numbers are accurate for all people in these groups depends on individual circumstances. However, it indicates a growing anxiety among younger generations about the financial demands of retirement.

The Reality of Retirement Savings

More concerning than the amount of money people think they need is what they have actually saved. According to the same Northwestern Mutual study, the average retirement savings among U.S. adults is $88,400, down from $89,300 the previous year. This underscores a substantial gap between retirement goals and savings to date.

Factors Influencing Retirement Needs

Several contributors impact the money retirement requires and the ability to save it, including:

• Inflation: The average U.S. inflation rate in the last 10 years has been 2.97%. Future retirees should include inflation in their retirement plans to keep pace with the rising costs of goods and services and to maintain their desired lifestyle.
• Lifestyle Choices: Standard of living, choice of hobbies and activities, dining and entertainment, travel plans, and other personal choices impact the amount of retirement income an individual needs.
• Healthcare Costs: Medical expenses increase with age, and the United States Department of Health and Human Services reports that 70% of Americans aged 65 and older will need long-term care, a significant expense. Additionally, healthcare costs outpace inflation due to factors like prescription drugs, labor, and administration.
• Geographic Location: Retirement location affects the cost of living. For example, Massachusetts requires approximately $1.6 million for 25 years of retirement while Hawaii jumps to more than $2.2 million.

Strategies to Bridge the Gap

Individuals should start planning as soon as possible to reduce the disparity between retirement expectations and savings. This allows compound interest to work, increasing savings over time. A budget that includes income, expenses, debt, and spending can help determine how much money is available to allocate toward saving for retirement. Working with a financial advisor can further position individuals for success by helping to grow and preserve wealth through income, investment, and tax planning. Here are some other strategies individuals can employ to close the savings gap:

• Contribute as much as possible: In the present, diverting funds to retirement accounts reduces disposable income but is an investment in the future. Individuals directly benefit from the money they put in, with the ability to withdraw after they retire—when they need it most. They should aim to put 10-15% of their annual income into personal or employer-sponsored retirement accounts.
• Invest wisely: The adage “Don’t put all your eggs in one basket” applies in finance. Advisors work to diversify investments on their clients’ behalf to balance risk and reward, ensuring their portfolio aligns with their risk tolerance and retirement timeline. Individuals, whether or not they choose to work with an advisor, should have their money in different kinds of accounts and varying risk levels.
• Delay retirement: Working to full retirement age (age 67 for those born in 1960 or later) or longer, up to age 70, can boost savings and increase monthly Social Security payments for life.

While some metrics suggest 10 to 12 times a person’s salary, and other sources give varying figures, the amount one needs to retire comfortably in 2025 varies and is unique to each individual. Because of this, those saving for retirement should create a personalized plan that considers their goals, lifestyle expectations, and finances. At SHP Financial, we combine financial strategy with the needs and objectives of our clients, creating a custom Retirement Road Map through thoughtful income, tax, investment, healthcare, and legacy planning. If you are concerned about having enough money for retirement, let SHP Financial help you build or strengthen your plan. Contact us for a complimentary assessment of your finances.