Retirement Retirement Planning

How Does Your Retirement 'Magic Number' Compare to Others?

Americans now believe they need $1.26 million to retire comfortably. Here's what to do if you're not there yet.

By Adam Palasciano

Edited by Calista Headrick

Updated July 17, 2025

Take a second to think about how much you believe you'll need to retire. Have you ever calculated your own number? That figure may feel daunting, but knowing your target is crucial for retirement readiness and crafting a stronger retirement plan that works for you.

Northwestern Mutual's 2025 Planning & Progress Study recently revealed how much Americans believe they will need to retire comfortably. And if you're worried you're falling behind the amount, don't fret. This article will guide you toward closing the gap and boosting your savings smartly.

Let's uncover where you stand now and the steps you can take to reach your own "magic number."

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What is the "magic number" Americans think they need to retire comfortably?

According to Northwestern Mutual's study, Americans think they'll need $1.26 million to retire comfortably. This is the "magic number" Americans believe is needed for a stress-free retirement, which is $200,000 less than the $1.46 million reported in 2024 and roughly on par with 2022 and 2023 estimates.

Despite this slight easing, it's still a hefty goal that reflects ongoing worries over outliving savings, health care costs, and inflation. Understanding this benchmark provides a useful reference point, but your own number may vary based on lifestyle, location, and health. Use it not as a limit, but rather as a starting point.

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How to calculate what you'll need

While everyone's individual scenario may be different, a common guideline for gauging your own magic number is 10 to 12 times your annual income at retirement age. If you're retiring at 67 and your income is $150,000 per year, for example, then somewhere between $1.5 and $1.8 million is a safe bet.

Another common suggestion is that you'll need 70-80% of your pre-retirement income to maintain your lifestyle. Be sure to reevaluate and adjust this figure for inflation and as your retirement goals change over time, and be aware that factors such as life expectancy, investments, Social Security, and other income sources may affect this number.

How close are you?

Northwestern Mutual's latest study revealed that one in four (25%) of Americans have saved only one year or less of their current annual income for retirement. Alarmingly, more than half (51%) also fear they will outlive their savings, and 35% haven't taken steps to close the gap.

This highlights a common but solvable problem: progress is possible even if you feel behind. The tips below can help you build momentum and catch up faster.

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1. Increase your retirement savings rate by 1% every year

Boosting your retirement account contributions, even by just 1% every year, can make a big financial difference over time and may significantly increase your capital in retirement.

Generally, it's best to save at least 15% of your pre-tax annual income each year, including your employer's match, to ensure you have a healthy nest egg in retirement. Over the decades, this simple shift can compound into substantial growth.

2. Delay Social Security

Postponing Social Security benefits beyond your full retirement age (FRA) increases your monthly payments permanently. In fact, delaying can add up to about 8% for each year you delay past your FRA.

While it doesn't directly affect your 401(k) balance, it can lessen your reliance on savings. That extra cash cushion lets your portfolio grow longer.

3. Take advantage of catch-up contributions

If you're 50 or older, max out catch-up contributions to your 401(k) and IRA.

Those aged 50+ can contribute an extra $7,500 to a 401(k) and $1,000 to an IRA in 2025, and those 60-63 have even higher limits up to $11,250.

Catch-up funds give a powerful boost when time is limited. Use them to help close the savings gap quickly.

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4. Optimize and diversify your investment allocation

Review your asset mix to maintain the right balance of growth and security. As you near retirement, it may be wise to shift some holdings from volatile stocks into more conservative assets like bonds or mutual funds.

Periodically rebalancing may protect gains and help reduce risk at critical times. A well-tuned investment strategy supports savings growth while limiting downside exposure as you reach retirement.

5. Reduce high-interest debt

High-interest loans, like credit cards, can eat into savings potential faster than investments can grow. Eliminating these debts frees up cash flow that you can redirect into your 401(k) or other accounts.

Even loans with lower interest rates can cut into your financial returns, so paying them down as soon as possible is a smart financial move.

6. Delay retirement by a few years

Even working an extra year or two may boost your savings and allow you to delay distributions. That short extension allows more time to accumulate and less time to draw down the nest egg. It's a simple move that can significantly boost your financial readiness.

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7. Consult a retirement professional

A financial planner can help fine-tune your strategy based on your goals, timelines, and risk. They can model scenarios and recommend adjustments to your retirement plan to help your money grow.

Personalized advice ensures you're not making costly assumptions, so investing in a financial expert may help you retire early or on your terms.

Bottom line

While Americans say they need $1.26 million to retire comfortably, many have saved far less and feel anxious about their financial future. By boosting savings rates, using catch-up contributions, reducing debt, and optimizing spending, you can close the gap and strengthen your plan.

These smart money moves can help you retire early and move forward with confidence while planning for retirement.

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