Is the American dream of retiring at 65 and living comfortably off savings completely dead? Maybe not. But here’s why it’s on life support
The American dream is to retire at 65 — if not sooner — and spend your golden years living comfortably off your savings. But 82% of American workers say achieving that dream is harder than it was for their parents’ generation, according to a CNBC retirement survey.
Four in 10 American workers say they’re behind on their retirement savings, while 69% are worried they won’t be able to fully retire. Why? Almost half (48%) say they’re struggling with debt or loans, or they simply don’t have enough to put into retirement savings.
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That means retiring at 65 looks increasingly uncertain for younger Americans — and while the dream may not be completely dead, it’s on life support. Yet, it doesn’t mean they’re doomed to a miserable existence in their golden years.
Why young Americans are struggling
It doesn’t just seem harder for younger Americans to save for retirement — it actually is harder. Life events are getting more expensive, from going to school to buying a house to raising kids to paying for medical care.
After crunching the numbers, Consumer Affairs came to some rather sobering conclusions. In terms of how prices have changed since 1970 relative to inflation, “Gen Z dollars today have 86% less purchasing power than those from when baby boomers were in their twenties.” Public and private school tuition has increased by 310% and 245%, respectively, since the 1970s. And Gen Z is paying 57% more per gallon of gas.
While the dollar isn’t stretching as far, Gen Z is also making less money relative to what baby boomers were earning at their age.
“Despite wages increasing since 1970, they haven’t even come close to keeping up with the massive increase in the cost of goods over the last 50 years,” according to the Consumer Affairs analysis.
Case in point: housing. In 1970, the median home price in the U.S. was $17,000, according to Better, a fintech mortgage provider. Adjusted for inflation (to 2020 dollars), the median home price would still only be $112,941. Compare that to the actual cost of a house, which sat at $412,300 in Q2 2024, according to the Federal Reserve Bank of St. Louis. Home prices are out of reach for many younger Americans, but even rent is skyrocketing — which, in turn, makes it harder to save for a down payment.
While many younger Americans hope to travel and pursue hobbies in retirement, the CNBC survey found that fewer workers expect to realistically achieve these pursuits. Rather, they believe they’ll end up spending their income on looming caregiving responsibilities.
Plus, there’s concern that their Social Security benefits are at risk. And, according to another study — this one from Northwestern Mutual — Americans estimate they’ll need to save a whopping $1.46 million for retirement. It’s no wonder younger Americans are feeling like their golden years won’t be so golden.
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The dream isn’t (completely) dead
But it’s not all doom and gloom, and it doesn’t mean a comfortable retirement is out of reach. Indeed, the CNBC survey found that 71% of younger Americans remain optimistic about meeting their retirement goals (though 21% are “doubtful.”)
The earlier you can start saving for retirement, the better: your money has more time to earn interest and grow, thanks to the power of compound interest. Start by regularly putting aside a portion of your paycheck into retirement savings. The rule of thumb is around 15% of your income, but start with what you can, and build up from there. Even small amounts add up over time.
If your employer offers 401(k) matching, try to max out your contributions (if it’s automatically deducted from your paycheck, it might make it easier to save). You may want to invest your money in a combination of tax-deferred accounts, depending on your income tax bracket, as well as invest in stocks and bonds. Also, come up with a plan to pay off your non-mortgage debts as soon as possible.
You may also want to reconsider the way you view retirement. After all, the shock of retirement can actually lead to a lack of purpose and depression. The CNBC survey found that only 11% of American workers have no plans to work after retirement; about half (52%) plan to keep on working, either to supplement their income or because they want to.
Younger Americans may want to consider the possibility of working in their golden years — even part-time or gig work — or finding a source of passive income, such as renting out a basement suite in their home. Or they may want to pursue a passion that also brings in some extra cash. That way they can supplement their retirement income, while gaining a sense of purpose in their golden years.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
