A recent WalletHub survey found that not having enough money saved for retirement is the main financial anxiety of slightly more than 25% of Americans.
And a lot of them have really high standards. According to Northwestern Mutual’s 2023 Planning and Progress Study, Americans believe they will require around $1.2 million on average to live well in retirement.
However, the majority have far less saved up; according to Vanguard’s 2023 “How America Saves” study, the median retirement account balance in the United States last year was $27,376.
If you think your retirement goals are a long way off, don’t worry. Promptly starting is one of the finest strategies to guarantee that you will have sufficient funds for a comfortable retirement. Early action pays well because compound interest works its magic to make even tiny payments increase tremendously over time.
As per the finance exert, the monthly amount that an individual earning $80,000 per year would need to save to accumulate $1.5 million by the time they reach retirement age of 67. Variable life events like market volatility, layoffs, raises, or promotions are not taken into account in our calculations, which are based on an initial balance of $0.
If you start at 21:
- 3% yearly rate of return equals $1,260 monthly.
- 5% annual rate of return earned: $697 monthly
- 7% yearly rate of return equals $366 monthly.
- Attaining a 10% yearly rate of return, or $128 monthly
If you start at 25:
- 3% yearly rate of return equals $1,485 monthly.
- 5% annual rate of return earned: $873 monthly
- 7% yearly rate of return equals $490 monthly.
- Making $192 a month at a 10% annual rate of return
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If you start at 30:
- 3% yearly rate of return equals $1,843 monthly.
- 5% yearly rate of return equals $1,167 monthly.
- 7% yearly rate of return equals $711 monthly.
- Attaining a yearly rate of return of 10%: $319 monthly
Setting a target amount for your overall retirement savings can be scary, even if it can be good to have one in mind.
Rather, concentrate on your savings rate—that is, the portion of your yearly income that you set aside for retirement. 15% is the recommended savings rate by Fidelity, which includes your employer’s match, if it is offered.
However, you’re not required to begin at that level straight away. As an alternative, begin where you can and raise your contributions by 1% annually until you achieve the suggested savings rate.