What’s the ‘Magic Number’ for Employee Retirement in 2025?

Financial anxiety remains high as market volatility has shaken up retirement confidence, but the amount of money that employees think they need to retire comfortably has actually fallen in the past year.

The “magic number” for U.S. workers to retire comfortably in 2025 is $1.26 million, according to new data from Northwestern Mutual. That’s $200,000 less than the $1.46 million figure reported last year — the highest number on record — and nearly flat with 2022 and 2023 estimates.  

The falling figure over the past year is likely due to stabilizing inflation, among other factors. Although inflation is not as elevated as it has been in recent years — the latest reading for year-over-year inflation was 2.4% in March, according to the U.S. Bureau of Labor Statistics — high cost of living is still a top concern and a reason for increased financial stress. Justin Ladner, senior labor economist at SHRM, said that the latest inflation numbers likely do not yet reflect President Donald Trump’s tariffs, which economists said may impact inflation in the coming months.  

“News that inflation moderated in March will not provide much comfort to businesses or policymakers,” Ladner said.

Northwestern Mutual’s survey of more than 4,600 people was conducted in January, before tariff talk that has swayed employees’ financial confidence.

“If we see the inflation rate rise, then I think Americans might reconsider if they need to save more to retire comfortably, and that number could climb,” said Casey Lewis, wealth management advisor at Northwestern Mutual’s Lewis Financial in Philadelphia.

While the number that people generally think they need in retirement has gone down in the past year, one big finding remains consistent: The amount that U.S. workers think they need to save is still much higher than what they actually have saved.

Among U.S. workers who have retirement savings, 1 in 4 (25%) said they have just one year or less of their current annual income put aside for their post-work years, according to Northwestern Mutual. About half of those surveyed (51%) said they think it’s somewhat or very likely they will outlive their savings, and 35% said they have not taken any steps to address that possibility. Only 16% of U.S. workers feel confident enough to say the prospect of outliving their wealth is “very unlikely,” Northwestern Mutual found.  

Meanwhile, 52% of Generation X workers— many of whom are approaching their retirement years — have only three times their current annual income, or less, saved. And the majority (54%) said they believe they will not be financially prepared for retirement when the time comes.   

Although the magic number is a general rule of thumb and retirement should be tailored based on individuals’ needs and situations, the fact that employees are generally far away from that figure indicates that there is much more they can do to improve their retirement efforts.  

Employer Support

With a large gap between what U.S. workers think they need for retirement and what they actually have saved, it’s clear that employer support for employees’ financial well-being is needed. Though headway has been made, there is more that company and HR leaders can do to bolster retirement programs and help employees understand — and improve — their savings efforts, experts said.

“One of the most impactful things employers have done is automate their retirement savings programs — auto-enrolling their new hires into 401(k)s,” Lewis said. “The earlier people start saving, the longer they can benefit from compound savings.”

Jonathan Price, national retirement practice leader and senior vice president at New York City-based HR consulting firm Segal, said that retirement programs need to better support employees’ efforts to plan for retirement. They can do this by making it an easy decision for employees to participate in the plan, enabling employees to accumulate the right amount of assets, and translating those savings into passive income during retirement.  

“Employers should explore the recent innovations in retirement plan design to better prepare employees for retirement while reducing employer risk,” Price said. “From my experience, the most effective way for employers to provide employees with financial peace of mind includes either a hybrid or traditional pension plan. That’s because pension plans provide employees with a stream of passive income in retirement, and employees won’t have to become investment experts overnight.”

Bolstering Communication 

There are other ways organizations can help, including by bolstering communication efforts — both in terms of the benefits already offered and in ways to improve financial literacy and practices.

“When employees have a thorough understanding of their employer benefits and the gaps that may exist in their planning, they can take action to build greater financial security,” Lewis said.  

Price agreed. “Employers need to actively promote the retirement plan, encourage consistent retirement savings — even during times of financial uncertainty — and provide resources to generate guaranteed retirement income,” he said.

Consistent seminars on financial literacy and tax planning for all employees who are in, or entering, an employer-sponsored retirement plan could move the needle, as well, Lewis said.

“This can help people see the long-term advantages of funding a group plan, and it will help instill the habit of saving and building long-term wealth,” he said.