Americans think the magic number they need to save to retire comfortably is $1.46 million, according to a 2026 Northwestern Mutual survey. Yet the median retirement savings in the country is just $87,000, highlighting a growing gap between what Americans expect they need and the savings they actually have.
In a system that increasingly requires you to self-fund retirement, this retirement savings gap could have ominous consequences, according to financial planner Preston Cherry, CFP, PhD, including…
Having to work into your late 60s and your 70s out of financial necessity.
Downgrading from the lifestyle you were accustomed to in your working years.
Struggling to cover expenses if you have to retire earlier than expected for health reasons and have little safety margin for medical and unexpected costs.
The Retirement Savings Crisis: An Overview
“Many Americans are stressed over their retirement predicament and worry about getting on track” says Cherry. “But they still struggle to save and don’t take meaningful enough steps.” In fact, nearly one-quarter of American workers aren’t making contributions to retirement accounts…and another quarter didn’t make even one contribution in the last year.
We asked Dr. Cherry the biggest reasons Americans don’t save more for retirement and what you can do to improve your own retirement savings…
Reason #1: High Cost of Living and Competing Financial Priorities
Many people’s incomes are barely enough to cover basic living expenses, such as housing, utilities, food and transportation. According to data from Bank of America, nearly 25% of all households were living paycheck to paycheck last year. And one of the biggest barriers to retirement savings is high interest debit, such as credit card debt and student loan debt. High-interest debt doesn’t just consume current income…it actively works against wealth building in a way that few other financial burdens do.
Reason #2: Lack of Financial Planning and Long-Term Mindset
A survey from leading accounting firm Deloitte found that 19% of retirement savers don’t know how much they should save or how to go about it. One of the most costly oversights: Not starting early enough to take advantage of the power of compounding growth.
Example: Two workers, both earning the same annual income, contribute $625 a month to their retirement savings at a 7% annualized rate of return. The first person contributes from age 25 to age 35 and then stops for the next 30 years. Result: He has about $878,000 at age 65. The second person waits to begin saving until age 35, then continues every month for the next 30 years. Result: He winds up contributing three times as much to his retirement accounts but ends up with only $762,000 at age 65.
“Most of us are simply hard-wired to have a present bias,” says Cherry. “That’s a concept from behavioral economics that describes our tendency to overvalue immediate, concrete rewards and undervalue future, more abstract benefits.”
How to Overcome Barriers to Retirement Saving
Here are three actionable tips I recommend to my clients to help them start or increase their saving for retirement. These can potentially add hundreds of thousands of dollars to your future nest egg…
Aim to save 15% of your gross income every year (including any employer match)
This is what many financial planners today consider a solid baseline and realistic target for a comfortable retirement. Time and compounding growth can take care of the rest. Example: Say you earn $50,000 at age 25 and save 15% ($7,500/year) at an average 7% annual return. At age 65, you will have $1.64 million. If savings 15% isn’t possible: Start at whatever percentage of your income you can, then commit to increasing it by 1% each year.
Automate…automate…automate
“The best way to beat procrastination in retirement savings is to remove the need for discipline, willpower and motivation entirely,” recommends Cherry. Set up automatic contributions from your paycheck or bank account into a retirement account (such as a 401(k) or an IRA). This works because the money is saved before you have a chance to spend it. Saving becomes a habit without effort as your lifestyle acclimates to your available income.
Establish protocols for “found money”
It’s easy to fritter away extra cash from tax refunds, bonuses, gifts, inheritances and side hustles. “Make a rule to always save some of these windfalls for retirement,” advises Cherry. By pre-deciding the amount, you eliminate decision paralysis. Example of a saving protocol: 50% of any windfall can go to a current need or desire so you don’t feel deprived. But the other 50% must go into your retirement savings. Every time you get a raise, redirect half of your after-tax increase into your retirement contributions before you consider raising your lifestyle in the form of better housing, a nicer car or an extravagant vacation.
