KEY POINTS
- The typical elderly American has approximately $609,000 saved for retirement.
- By beginning to save and invest at a young age, you have the potential to retire with twice the amount you originally saved.
- Keep in mind that you can count on receiving Social Security benefits, and you may also have a part-time job or another form of income during your retirement.
A significant number of individuals reach retirement age without having saved much, if anything. Consequently, these retired individuals often depend heavily on Social Security to cover the majority, if not all, of their expenses. This situation is far from ideal, as the average retired worker currently receives approximately $23,000 annually.
To prevent financial difficulties in your later years, it is important to work towards accumulating a substantial amount in your savings. retirement savings account for individuals , 401(k), or retirement savings account of your choosing. However, what amount of savings should be your target?
It could be beneficial for you to be aware that the typical retirement savings balance for individuals between the ages of 65 and 74 in the United States is approximately $609,000, as reported by the Federal Reserve. By implementing a sound plan, you have the potential to exceed this amount significantly. It is possible to begin your retirement with savings totaling double that figure, and achieve this without much effort.
Your most valuable possession is time.
One might think that in order to have double the amount of savings compared to the average elderly American when retiring, they would have to allocate a significant portion of their monthly income to their IRA or 401(k). However, this is not the case at all.
If you allow yourself an extended period to save and invest put your money into investments After investing in stocks for a long period of time, you might discover that you can effortlessly accumulate a substantial amount of savings and retire in a comfortable manner.
In the last five decades, long-term investors have typically received an average yearly return of 10% from the stock market. This includes periods of strong market performance and times of significant decline.
Suppose you are in a position to begin setting aside money for retirement at 25 years old. This implies that you may not be actively contributing to an Individual Retirement Account (IRA) or a 401(k) yet. moment You have begun your full-time career at a relatively young age.
If you consistently invest $250 per month into a retirement account invested in stocks that yield an average annual return of 10%, you would accumulate slightly over $1.3 million by the time you reach 65 years old. This amount is more than double the current average savings balance and should provide you with a comfortable retirement fund.
What will occur if you begin at a later time?
Imagine you are in your thirties and have not yet begun saving for retirement. The positive aspect is that you still have the opportunity to build up savings that are double the current average balance.
You should be ready to allocate more money each month. However, if you have a 30-year timeframe for saving and your investment portfolio provides a consistent 10% return, contributing $600 monthly will help you reach approximately $1.2 million.
Saving $600 per month is more challenging than saving $250. This is why it is beneficial to begin saving as soon as possible.
It’s not necessary to exceed the average retirement savings, but it’s worth making an effort to do so.
Having a retirement savings of $609,000 is a significant amount. You may not need to strive to increase this amount to double or exceed it if you are sure you can comfortably live on a nest egg of that magnitude.
It is important to note that the average savings of $609,000 does not include Social Security benefits. Additionally, some elderly individuals may have additional sources of income such as a pension or earnings from part-time work.
If you aim to achieve a savings balance similar to the average American today, that’s acceptable. However, it’s important to understand that retiring with a significantly higher amount is achievable by utilizing the stock market effectively and allowing your money ample time to increase in value.
