How much money do you need to have saved for retirement? If you’re a Money Vehicle student, you know that there isn’t a single answer — every individual will have a different savings goal in mind. There are a lot of reasons for that, too, as specific goals, time horizons, risk profiles, and other things come into play.
But if you want to think in broad strokes, or at least get some sort of target figure in mind, there is a number that can be sourced from Northwestern Mutual’s Planning & Progress Study 2023, which is an annual release that looks at U.S. adults’ attitudes and behaviors surrounding money and financial decision-making.
The number? Around $1.3 million.
From the study: “Americans believe they will need $1.27 million to retire comfortably. That number continues to increase, up from $1.25 million reported last year. Meanwhile, the average amount that U.S. adults have saved for retirement modestly increased by 3% to $89,300 from $86,869 in 2022. Among age groups, people in their 50s expect to need the most for a comfortable retirement – over $1.5 million. The numbers drop considerably for people in their 60s and 70s, largely because many of them are already in retirement.”
And “high-net-worth individuals,” the study says, which includes people with more than $1 million in investible assets, say they’ll need $3 million to retire comfortably.
Here’s a chart, too, for a visual:
Saving For Retirement
While saving up $1.3 million for retirement sounds insurmountable for many of you, assuming that you’re still a student or relatively young, the good news is that you have time on your side. That’s not to say that reaching your goal, whatever it is, is going to be easy, but it’s doable. There are a couple of things that you can use to your advantage to get there, too: Compounding, and the tendency of the market to gain value over time.
At Money Vehicle, we talk about compounding a lot. As a quick refresher, compounding interest is, essentially, when you earn interest on your deposits, plus the interest it’s already accumulated. It’s sort of a snowball effect for your savings — so, with little or no effort, your savings could grow substantially faster than they would otherwise.
But again, you’ll need to make sure you’re saving regularly and over a long period of time to make the most of it.
Another thing: The stock market tends to go up over time. It doesn’t go up ALL THE TIME, which is important to realize. But over long stretches, the market goes up, and even when there is a recession or downturn, it’s always bounced back — at least so far!
That’s why it’s also important to invest, invest often, and invest regularly. Similar to compounding, your investments should or could gain value over time, supercharging your net worth and overall savings. There are no guarantees, of course, but keeping your focus on saving and investing for the long-term should help you reach your retirement savings goals. Whether that’s $1.3 million, or more!
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