Finance

How much to save per month to have $1.7 million in retirement

On average, American workers think they’ll need $1.7 million saved for retirement, but just under half believe they’re likely to meet their savings goals, according to a recent study by Charles Schwab.

That’s understandable: financial planners typically recommend saving between 10% and 15% of your gross annual salary for retirement, which is no small feat.

But if you are not yet able to save that much, don’t panic. Workers with employer-sponsored retirement plans contribute only about 7% of their income to their retirement fund on average, according to Vanguard’s “How America Saves in 2022” report.

With this in mind, CNBC calculated how much you’d need to put away to save $1.7 million by 65, as well as how much you’d need to earn to achieve this without saving more than 15% of your income.

While these calculations can give you an idea of ​​what you’d need to save to reach your retirement savings goal of $1.7 million, they don’t take into account various factors outside of your control, such as market volatility, unexpected life events, salary increases , periods of unemployment or interest you will earn on your savings.

Here’s how much you need to put away each month to save $1.7 million by 65.

If you start at 25 years old

Earn an annual rate of return of 4%: $1,433.51 per month

  • Required annual salary if you save 10% of your income: $172,021
  • Required annual salary if you save 15% of your income: $114,686

Earnings at a 6% annual rate of return: $853.63 per month

  • Required annual salary if you save 10% of your income: $102,436
  • Required annual salary if you save 15% of your income: $68,294

Earnings at an annual rate of return of 8%: $486.97 per month

  • Required annual salary if you save 10% of your income: $58,436
  • Required annual salary if you save 15% of your income: $38,959

If you start at 30 years old

Earn an annual rate of return of 4%: $1,860.50 per month

  • Required annual salary if you save 10% of your income: $223,260
  • Required annual salary if you save 15% of your income: $148,848

Earnings at a 6% annual rate of return: $1,193.23 per month

  • Required annual salary if you save 10% of your income: $143,187
  • Required annual salary if you save 15% of your income: $95,463

Earnings at an annual rate of return of 8%: $741.10 per month

  • Required annual salary if you save 10% of your income: $88,932
  • Required annual salary if you save 15% of your income: $59,291

If you start at 40 years old

Earn an annual rate of return of 4%: $3,306.56 per month

  • Required annual salary if you save 10% of your income: $396,787
  • Required annual salary if you save 15% of your income: $264,538

Earnings at a 6% annual rate of return: $2,453.12 per month

  • Required annual salary if you save 10% of your income: $294,375
  • Required annual salary if you save 15% of your income: $196,260

Earnings at an annual rate of return of 8%: $1,787.54 per month

  • Required annual salary if you save 10% of your income: $214,505
  • Required annual salary if you save 15% of your income: $143,010

As the calculations show, the sooner you start saving for retirement, the less you’ll need to save each month because your money will have more time to grow. complex.

In fact, one of the biggest mistakes people make when it comes to retirement planning is not starting early enough and increasing their contributions over time, says Nathan Voris, director of investments, insights and consulting for Schwab Retirement Plan Services.

“You don’t have to start with a bang,” Voris says. “Even if you start small, it engages you, and then you can increase it every year.”

Until that point, it’s smart for workers in their 20s and 30s to take advantage of opportunities like an employer-sponsored 401(k) match if it’s available, says Joe Duran, co-head of Goldman Sachs’ personal finance management group.

For workers in their 40s, Duran recommends working with a financial advisor to discuss your retirement goals and priorities. “This will help you build a holistic financial plan to create a meaningful retirement for you,” he says.

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