How much money do you need to retire? As you can imagine, the answer is entirely relative and depends on your lifestyle, your means, and so many other determining factors. But if you’ve ever wondered how your personal retirement goals stack up to the retirement goals of most Americans, you’re in luck. The financial investment management company Charles Schwab recently surveyed 1,000 401(k) participants to suss out an average figure that most Americans believe they’d need to sock away in order to live out their golden years in comfort. The answer?
It’s $1.7 million.
According to Nathan Voris, a managing director at Schwab Retirement Plan Services, that’s “a pretty good number if you average out age and media salary across the U.S.”
But here’s the bad news: most of us aren’t on track to meet that goal.
The nationwide survey found that around half (51 percent) of participants are only contributing 10 percent of their salary or less to their 401(k), which makes their average annual contribution only $8,788.
“The people we surveyed have a realistic target for retirement, but many likely aren’t on track to get where they want to go. It’s important for anyone with a 401(k) plan to understand that they’re already an investor, whether they realize it or not,” said Steve Anderson, the president of Schwab Retirement Plan Services. “Shifting your mindset from ‘saving for retirement’ towards ‘investing for retirement’ can help you to better understand that you are participating in the market when you contribute to a 401(k), and ultimately better help you reach your goals.”
Anderson suggests starting early. For example, if you begin putting away 10 to 15 percent of your salary in your 20s, you’ll likely be able to comfortably retire when the time comes—thanks to the wonders of compound interest. But if you don’t start until you are in your 40s, you might need to invest as much as 35 percent of your annual salary, which can be a challenge for most people.
“Any effort to set aside money for the future is worthwhile,” said Catherine Golladay, the chief operating officer at Schwab Retirement Plan Services. “That said, money intended for retirement has far more growth potential if it’s invested through an IRA or Health Savings Account, for example, than if it’s placed in a regular savings account. Having access to more investment education could help participants get more out of their investments, both inside and beyond their 401(k) accounts.”
For some excellent advice getting your savings on track, check out 10 Things They Don’t Tell You About Retirement Savings.
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