High inflation is distorting Americans’ retirement perceptions, as rising living costs push up current income expectations and required retirement savings, reports CNBC.
In a June survey conducted by Bankrate with 2,500 adults, the findings reveal that Americans believe they would need an average annual income of $233,000 to feel financially comfortable. However, to consider themselves truly “rich,” they feel they would require an average annual income as high as $483,000.
A recent survey conducted by Northwestern Mutual on retirement savings indicates that Americans now believe they need around $1.27 million in their savings to enjoy a comfortable retirement. This amount has increased compared to the previous year’s figure of $1.25 million. The survey involved 2,700 adult respondents.
Sarah Foster, an analyst at Bankrate, explained to CNBC that the primary factor driving the need for Americans to seek higher earnings to achieve comfort is inflation.
Foster pointed out that the escalating inflation rates are fostering a natural anticipation of even higher prices in the future. She attributes this expectation to the potential impact of high inflation on people’s financial well-being, suggesting it could leave lasting effects on their wallets. This was reported by the source.
Foster offers two essential tips to maintain realistic retirement expectations and outcomes. The first tip is to take “small steps” and maintain a consistent investment approach. The second tip is to live within your means. By following these guidelines, individuals can better prepare for a secure retirement.
In recent Bankrate research, the most common financial regret expressed by individuals is not saving enough for retirement.
According to CNBC’s report, Foster warns that taking a break from investing could lead to significant losses. For instance, investors in their 20s who pause their investments for three years may potentially lose almost $200,000 in earnings, assuming a contribution of $200 per month and an 8% annual return.
Alap Patel, a wealth management advisor based in Chicago, advised CNBC that although income may rise, the temptation to increase spending should be resisted.
Patel emphasized the significance of consulting a financial planner to help define your individual financial objectives.
