Americans Need More to Retire

According to research done by Wall Street Journal and Northwestern Mutual Americans think they need more to retire comfortably.

In fact, they think it is a lot more. The average American believes they need $1.25M to retire comfortably. That is up 20% from last year.

So, what can you do to ensure you hit that number?

Where Are You in Your Retirement Journey?

Age and time until retirement will play a big part in answering whether you have enough money to retirement.

Younger people have time on their side to get on track. Older investors typically have better income to invest more and catch up if they are not pacing to save enough money.

It is also important to consider your own savings goal. $1.25M is the average of many different people but your number will differ depending on your lifestyle.

For sake of this post, I will use the $1.25M number but you can adjust accordingly for yours.

Young Savers

I typically think of young savers as anyone just out of college until 35 years old.

They have 30+ years until retirement and are within the first decade of their careers.

These savers have time on their side, which is the biggest advantage.

So how hard is it to save $1.25M in 30 years. Well, let’s check the math!

To refresh your memory, go back to my last blog post, and read about the different allocations. Those allocations are where these return numbers are coming from above.

A young investor who considers themself conservative would earn roughly a 4% return annually. Over 30 years they would need to contribute $20,000 each year to hit $1.25M.

Following that same logic, a balanced or moderate investor would need to save $14,000 each year.

And an aggressive investor would need to contribute about $9500 annually.

This makes sense the more aggressive you are the better your expected returns. This is why it pays so much more to be aggressive when you are young so you can reap the benefits of compound interest.

Young Professional Investors

I categorize young professional investors as anyone aged 35-55.

You may have a family, a house, a couple cars, and a lot of expenses.

You also are in some of your best earning years as you progress from entry level positions to more senior roles.

If you have not hired a financial advisor already this would be the time to start looking. FYI I am here to help!

Your life is probably busier than it has ever been. You may not have time to manage your own money. Let alone think about things like paying for kids to go to school, life insurance, wills, and all that fun stuff that comes with adulting.

A financial advisor will help ensure you stay on track for your retirement goal but also consider smaller goals outside of that.

Things like buying a house, paying for college, saving enough for medical expenses are all ancillary aspects the advisor would look at. Among many other areas as well.

It is crucial to check in with your advisor at least annually to gauge progress and tweak things as needed. This will give you peace of mind and allow you to focus on your other responsibilities.

Near Retirement Investors

Investors near retirement are anyone older than 55. I consider these people within 15 years of retirement.

These are powerful years for investors. They are likely in their peak earning years. They may have paid off many of their debts. They also may be transitioning to being empty nesters for the first time.

It is important at this point to start coming up with a retirement plan. Knowing what age you would like to retire. Then making sure your savings goals are on pace is crucial.

You may have grandkids soon who needed to be added as beneficiaries to your accounts. or you may even want to pay for college tuition for them someday.

Another big decision is Social Security and when you should take your benefits. The longer you wait the bigger the benefit. I can help you figure out the optimal point to take social security to make your portfolio last longer.

You also may want to look at your assets and consider investing in a way that is more conservative but also guarantees you income. This would act similar to a pension if you do not have one already.

A good advisor will make sure you are on pace to meet all of these goals as you begin to transition out of the workforce.

Still Don’t Think You Will Save Enough?

Sometimes you can do everything right and you still think you might not be doing enough. This is normal. This especially happens in down markets.

The thing to remember is bear markets end and make way for a new bull market.

Time in the market and consistently putting money into investments is an easy way to reach your goals.

The hardest part sometimes is just getting started. So please reach out to me and let me help you with that part.

How much will you need to save for retirement?