Planning & Progress Study 2024

Americans have a rosier view of the direction of the U.S. economy, and yet, their feelings of financial insecurity have hit a record high.

Just over half (54%) of U.S. adults expect the United States will enter a recession this year. While still a majority, it’s a substantial drop from the two-thirds (67%) who predicted a recession last year. These more positive economic expectations are consistent across generations, with double-digit increases in optimism among Gen Z, Millennials, Gen X and Boomers+ alike.

At the same time, Americans’ feelings of personal financial insecurity are on the rise. One-third (33%) of adults say they do not feel financially secure. This represents a jump from 27% who said the same last year and is the highest level of insecurity recorded in the study’s history. The Northwestern Mutual Planning & Progress Study started in 2009, and began measuring financial security using its current methodology in 2012.

Inflation is the clear driver underpinning that insecurity. Despite dropping substantially from its peak in 2022, inflation rates continue to weigh heavy on Americans’ minds. More than half (54%) of U.S. adults expect inflation to increase this year, and only 9% say their household income is outpacing it. By far, inflation is considered the greatest obstacle to financial security, coming in well ahead of factors such as lack of savings and debt.

Government Dysfunction and the Presidential Election are Among People’s Top Concerns for 2024

Beyond inflation, Americans are particularly worried about the impact that decisions – or indecision – by government officials could have on their financial well-being this year. When asked to rank the concerns that could impact their finances the most in 2024, “inflation” (57%) topped the list  but “government dysfunction” (34%) and “the U.S. Presidential Election” (33%) ranked second and third, coming in ahead of longer-term worries such as “a potential recession” (24%), “interest rates” (24%), “market volatility” (15%) and “geopolitical conflicts” (14%).

Playing Defense

Given current market and economic conditions, 42% of U.S. adults feel 2024 is a year to prioritize “playing defense” with their savings and investments (managing risk to protect their assets) vs. 29% who feel it’s a year to be “playing offense” (capitalizing on opportunities to grow their assets); and 29% are unsure.

The gameplan for those who favor playing defense is mostly focused on cutting costs (56%) and building savings (51%). Younger generations score higher on adding a side hustle (46% for Gen Z and 43% for Millennials). About one in six Millennials (16%) said that they would get a financial advisor, while 15% said they would buy life insurance or increase life insurance coverage. Among high-net-worth individuals – people with more than $1 million in investable assets – higher numbers reported moving into safe, high-yielding instruments like money market funds (40%).

The gameplan for those who favor playing offense is mostly focused on investing more in the stock market (42%), particularly for Gen Z (52%) and the high-net worth (50%). About half as many Americans indicated interest in investing more in real estate (21%), high-yield bonds (21%), alternative assets like hedge funds and private equity (19%), and speculative investments like cryptocurrencies (17%). Just 9% expect to invest more in gold or silver.

Discipline in Decline

Intentions don’t always translate to action when it comes to financial planning. In fact, the research shows a continued decline among Americans who consider themselves “disciplined” financial planners – from 65% in the post-Covid 2020 study to 45% in 2024.

People are Still Spending

Despite high levels of financial insecurity, many Americans don’t expect to largely pull back their spending on discretionary things like restaurants, vacations and entertainment in 2024. The research finds 59% of U.S. adults say they’ll either spend the same or more on these purchases year-over-year, while just under four in 10 (37%) say they’ll spend less. Among generations, Gen Z is the most likely to say they’ll increase non-essential spending and Gen X is the most likely to say they’ll be tightening their belts.

In forthcoming data sets, Northwestern Mutual’s 2024 Planning & Progress Study will explore wide-ranging issues facing Americans spanning savings and debt, work and retirement, planning, priorities and more.

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Read the 2024 Planning and Progress Study - The Financial States of America

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Americans’ “magic number” for retirement is surging to an all-time high – rising much faster than the rate of inflation while swelling more than 50% since the onset of the pandemic.

U.S. adults believe they will need $1.46 million to retire comfortably, a 15% increase over the $1.27 million reported last year, far outpacing today’s inflation rate which currently hovers between 2% and 3%. Over a five-year span, people’s ‘magic number’ has jumped a whopping 53% from the $951,000 target Americans reported in 2020.

By generation, both Gen Z and Millennials expect to need more than $1.6 million to retire comfortably. High-net-worth individuals – people with more than $1 million in investable assets – say they’ll need nearly $4 million.

Meanwhile, the average amount that U.S. adults have saved for retirement dropped modestly from $89,300 in 2023 to $88,400 today, but is more than $10,000 off its five-year peak of $98,800 in 2021.

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

Gen Z: Starting sooner with the aim of ending earlier

The average age that Americans say they started saving for retirement is 31. But for Gen Z, it’s 22 – nearly a decade earlier. It’s also a full 15 years before Boomers+ who say they started when they were 37. Millennials and Gen X’ers began saving for retirement at ages 27 and 31, respectively.

The hope among Gen Z is that by starting to save sooner, they’ll be able to retire earlier. They expect to retire at the age of 60, a dozen years before Boomers+ who say they’ll work until they’re 72. Millennials and Gen X’ers expect to work until 64 and 67, respectively. The average age most people expect to work to is 65.

The research discovered that three in 10 Millennials and Gen Z Americans believe it’s likely or highly likely that they will live to age 100. The sentiment among these younger generations is stronger than older generations. Among Gen X and Boomers+, just 22% and 21% respectively agreed that they believed they would live to 100.

The ‘Silver Tsunami’ is here

In 2024, more than four million Americans will turn 65. That’s an average of 11,000 Americans per day, and it will continue through 2027. It’s the largest surge of Americans hitting the traditional retirement age in history.

The 2024 Planning & Progress Study found that among generations closest to retirement, just half of Boomers+ (49%) and Gen X (48%) believe they will be financially prepared when the time comes.

On average, Gen X believes there is a 42% chance they could outlive their savings, while Boomers+ put the probability at 37%. Across both generations, more than a third (37% and 38%, respectively) have not taken any steps to address the possibility of outliving their savings.

When digging into some of the most pressing challenges associated with retirement planning, the research shows that Boomers+ and Gen X don’t have markedly strong confidence in their preparedness.

Taxes are an afterthought

Only three in 10 (30%) Americans have a plan to minimize the taxes they pay on their retirement savings. Among them, the top 10 strategies employed include:

1. Making withdrawals strategically from traditional and Roth accounts to remain in a lower tax bracket (32%)
2. Using a mix of traditional and Roth retirement accounts (30%)
3. Making strategic charitable donations (24%)
4. Using a Health Savings Account (HSA) or other tax-advantaged healthcare account (23%)
5. Using products like permanent life insurance or annuities for the tax benefits (22%)
6. Making Roth conversions prior to taking RMDs or Social Security (19%)
7. Using qualified charitable distributions from an IRA (17%)
8. Making contributions to other tax-advantaged accounts like a 529 (14%)
9. Using the basis paid into the cash value of permanent life insurance to remain in a lower tax bracket (13%)
10. Taking advantage of a Qualified Longevity Annuity Contract (QLAC) to set aside funds for later in retirement (13%)

In forthcoming data sets, the 2024 Planning & Progress Study will explore wide-ranging issues facing Americans spanning savings and debt, retirement income, emerging technology, professional help and more. 

Read the news release

Read the 2024 Planning & Progress Study – Work, Retirement & Taxes