Finance

The ‘magic number’ to retire comfortably hits a new all-time high

Published

11 months ago

April 9, 2024

FOX Business’ Ashley Webster talks to diners in The Villages, Florida about retirement as a Northwestern Mutual survey claims it will take $1.46M to retire comfortably.

Inflation has made the cost of just about everything in the U.S. more expensive – including retirement.

A new study published by Northwestern Mutual found the “magic number” that Americans believe they need in order to retire comfortably hit $1.46 million this year, the highest level on record.

The figure represents a nearly 15% jump from the $1.27 million that Americans said they needed in 2023, easily outstripping the current 3% inflation rate in the country.

Over the past five years, Americans’ “magic number” has surged 53% from the $951,000 reported in 2020, according to the financial services firm.

WHY ARE GROCERIES STILL SO EXPENSIVE?

The figure represents a nearly 15% jump from the $1.27 million that Americans said they needed in 2023, easily outstripping the current 3% inflation rate in the country. (iStock / iStock)

By generation, both Gen Z and millennials anticipate they will need more than $1.6 million to retire comfortably. Among high net-worth individuals – or those with more than $1 million in investable assets – the figure catapults to about $4 million.

Even though they expect to need more money in retirement, Americans are not actually saving more.

The average amount that U.S. adults have tucked away for retirement fell to $88,400 from $89,300 in 2023. However, that is down more than $10,000 from the five-year peak of $98,800 in 2021, the study said. In total, the gap between what people think they need for retirement and what they have actually saved is $1.37 million. By comparison, just five years ago, that was about $874,000.

US ECONOMY ADDS 303K JOBS IN MARCH, MUCH STRONGER THAN EXPECTED

“Across all segments, there are large gaps between what people think they’ll need to retire and what they’ve saved to date,” the study said.

The study comes as Americans continue to confront stubbornly high inflation that has rapidly eroded their purchasing power and, in some cases, forced them to use their retirement savings as a financial lifeline.

Shoppers are seen in a Kroger supermarket on Oct. 14, 2022, in Atlanta. (Photo by Elijah Nouvelage / AFP / Getty Images)

A separate study by the Alliance Life Insurance Company of North America shows that nearly 7 in 10 respondents said they have not contributed as much to their savings due to higher prices for everyday goods, while 42% of households reported dipping into their retirement savings.

“The rising cost of living is stretching American budgets,” said Kelly LaVigne, vice president of consumer insights at Allianz Life. “Just because inflation has slowed doesn’t mean prices have gone down. In the short term, it may be wise to delay any major purchases to keep saving toward your future and avoid taking on new debt.”

GET FOX BUSINESS ON THE GO BY CLICKING HERE

Inflation has created severe financial pressures for most U.S. households, which are forced to pay more for everyday necessities like food and rent. The burden is disproportionately borne by low-income Americans, whose already-stretched paychecks are heavily impacted by price fluctuations.

While inflation has fallen considerably from a peak of 9.1% notched during June 2022, it remains above the Federal Reserve’s 2% goal. And when compared with January 2021, shortly before the inflation crisis began, prices are up a stunning 18.49%.

Finance

NVDA, INTC, PEP, TSLA and more

Published

1 hour ago

March 12, 2025

Business Finance News

Finance

Here’s the inflation breakdown for February 2025 — in one chart

Published

3 hours ago

March 12, 2025

Business Finance News

Eggs for sale at a grocery store in Los Angeles on Feb. 26, 2025.

Eric Thayer/Bloomberg via Getty Images

Inflation receded in February on the back of easing price pressures for consumer staples like gasoline, groceries and housing, amid worries that President Donald Trump’s tariff policies could stall progress.

The consumer price index rose 2.8% for the 12 months ended in February, the U.S. Bureau of Labor Statistics reported Wednesday. That’s down from 3% last month.

The deceleration is encouraging after fears in recent months that inflation had become entrenched and wasn’t falling back to target.

“Progress is bumpy,” said Michael Pugliese, senior economist at Wells Fargo Economics. “It’s not a linear path down. There are still risks, but there are no signs of a reacceleration with the data in hand.”

The consumer price index measures how quickly prices rise or fall for a basket of goods and services, from haircuts to coffee, clothing and concert tickets.

CPI inflation has declined significantly from its pandemic-era high of 9.1% in June 2022. However, it remains above the Federal Reserve’s target. The central bank aims for a 2% annual rate over the long term.

Inflation rate hits 2.8% in February, less than expected

“Excluding any major policy changes, I’d expect [inflation] to continue gradually slowing,” Pugliese said. “Of course, the big question on everyone’s mind is, what are the big policy changes that will happen over the course of this year?”

Trump imposed a fresh round of tariffs on foreign steel and aluminum imports on Wednesday, triggering retaliatory tariffs from Europe on about $28 billion of U.S. goods starting in April. The Trump tariffs follow on others he’s already imposed on Canada, China and Mexico, the three largest trading partners of the U.S.

Tariffs, a tax paid by U.S. importers, add costs for businesses that ultimately get passed to consumers, economists said. Steel tariffs, for example, could make steel-intensive items like cars, homes and machinery more expensive, they said.

The president has proposed additional tariffs, though it’s unclear if they’ll take effect or for how long.

Egg prices are up 59%

Egg prices spiked by 59% over the past year, by far the largest increase for any item in February.

An outbreak of avian flu — which is highly contagious and lethal among birds — has killed millions of egg-laying chickens and reduced egg supply, economists said. The U.S. Justice Department also opened an investigation into potential antitrust issues related to the surging price of eggs, according to news reports.

The price of instant coffee has also increased about 9% in the past year, according to CPI data. Weather patterns like droughts fueled by climate change have disrupted major coffee growers including Brazil, reducing supplies of coffee beans.

Overall, though, inflation for groceries is relatively low, at 1.9% in the past 12 months.

Gasoline inflation was also tame in February. Prices were down 1% from January to February, and down 3% in the past year, according to CPI data.

Shelter is the largest component of the CPI, and movements up and down can have a significant impact on overall inflation readings. Annual inflation for shelter was at 4.2% in February, the lowest since December 2021.

“Housing inflation is historically the ‘stickiest’ component of inflation, meaning it takes longer to buck price trends,” Gargi Chaudhuri, BlackRock’s chief investment and portfolio strategist for the Americas, wrote in an e-mailed note Wednesday. “The recent trend in housing prices keeps us optimistic on the future trajectory of inflation.”