Northwestern Mutual released the retirement section of its 2026 Planning & Progress Study on April 1, finding that Americans now believe they need $1.46 million saved to retire comfortably, up $200,000 from the figure reported a year earlier. Investors who already have $1 million or more in investable assets put the number even higher, at $2.67 million. The gap between what people think they need and what they have saved has been widening for several years, but the size of this year's jump stands out.
What changed
The insurer's annual survey, one of the longest-running gauges of retirement sentiment, asks a representative sample of adults how much they think they will need to retire the way they want. The figure is not a calculation of any individual's actual expenses; it is a snapshot of confidence and anxiety. This year's increase coincides with several years of inflation eroding the purchasing power of a fixed savings target, plus market volatility that has made retirees and near-retirees reassess how far a given portfolio balance will stretch. Only about 54% of non-retirees said they feel financially prepared for retirement, and that figure jumps to 74% among people who work with a financial advisor versus 43% among those who do not. The study also found generational differences in when people expect to retire, with younger respondents targeting earlier retirement ages even as their reported savings confidence lags older cohorts.
Who is affected
The headline number gets attention, but it obscures a detail that matters more for high earners: the study measures a pretax, gross savings target, not what a household actually gets to spend. Two people who both have $1.46 million saved can have very different retirements depending on where that money sits. A dollar in a Roth account is worth a full dollar in retirement. A dollar in a traditional 401(k) or IRA is worth less, because ordinary income tax is still owed when it comes out — and required minimum distributions eventually force much of it out on the IRS's schedule, not the retiree's. Households with most of their savings concentrated in a single employer's pretax plan are the ones most exposed to this gap, since they have the least flexibility to control which bracket their withdrawals land in.
The after-tax math
Consider two hypothetical retirees, each with $1.46 million saved and each in a 24% marginal federal bracket during retirement.
| Account mix | Balance | Tax owed on withdrawal | Spendable value |
|---|---|---|---|
| All traditional (401(k)/IRA) | $1,460,000 | ~$350,000 (24%) | ~$1,110,000 |
| Half traditional, half Roth | $1,460,000 | ~$175,000 (24% on half) | ~$1,285,000 |
| All Roth | $1,460,000 | $0 | $1,460,000 |
The example is illustrative and ignores state income tax, which would widen the gap further for retirees in high-tax states. It also ignores the fact that required minimum distributions from traditional accounts, combined with Social Security, can push a retiree's income into a higher bracket than they expected, or trigger higher Medicare Part B and D premiums through the income-related monthly adjustment amount. A retiree with the same $1.46 million balance can end up with materially different after-tax income depending on account type, filing status and the state where they retire.
Moves to discuss with your advisor
- Whether Roth conversions during lower-income years — early retirement, a sabbatical, a year with large deductions — make sense before required minimum distributions begin.
- Whether a workplace plan's after-tax or Roth contribution options are being used to their limit, not just the pretax deferral.
- How Social Security claiming age interacts with the tax bracket a household expects to occupy once distributions start.
- Whether the household's true retirement number should be expressed after-tax rather than as a single gross savings figure.
What to watch
Northwestern Mutual's full study, including generational breakdowns on savings behavior and confidence, is scheduled for broader release later in the year. Households running their own retirement projections may want to model the after-tax version of their number rather than relying on the survey's pretax figure, since the account mix — not just the total — determines how far the money actually goes.
Sources
- First reported Planning & Progress Study 2026 — Northwestern Mutual
- 2026 Planning & Progress Study Financial Trends & Insights — Northwestern Mutual
After TAX is an independent publication. Articles are general information, not tax, legal or investment advice. Consult a licensed professional about your situation.
