$1M Is No Longer the Standard Nest Egg – Here’s How Much Most Americans Think You Actually Need To Retire
skynesher / iStock.com
A common financial rule of thumb is that you should save $ 1 million for retirement, but that advice may be out of date by now - you may need roughly double that. At least that's what most 401 (k) plan participants believe. A recent survey by Schwab Retirement Plan Services found that, on average, participants in the 2021 plan think they need to save $ 1.9 million for retirement. But how accurate is that number?
Read: Stunning Statistics on the State of Retirement in America
See: Here's Exactly How Much Savings Your State Needs To Retire
$ 1.9 million is a good estimate of how much you will need in retirement
Nathan Voris, director of business strategy at Schwab Workplace Financial Services, thinks survey respondents have a pretty good idea of how much they will need in retirement.
"I think that's a pretty good number for a poll like this," he said. “It's a standard range for a wide range of people. Of course, retirement isn't one size fits all, but for many people that's in the middle. "
As Voris notes, there are numerous factors that affect how much someone actually needs in retirement, so some may need more and some may need less.
“So much has been written about it, but I'll reduce it to a few things. One is when do you want to retire? ”Said Voris. “If you retire at 50, you have to budget for 45 years of living expenses. If it's 67, you have to plan for 30 years. That has a big impact on what your plan should be. "
Learn: The Cons of Retirement No One Talking About
Find Out How Long Retired $ 500,000 Will Go In Each State
“One of the other levers is what lifestyle will you have when you retire?” He went on. "Where are you going to live? Do you want to live in California or Wyoming? Think about the state tax perspective. Do you want to lead an active lifestyle? Or do you live near grandchildren where you will be pretty local? There are many factors, like You want to live in retirement. "
After all, how much you need to save for retirement depends on your other sources of income in retirement. These include social security, pensions, wealth and inheritance.
"Such things can be a factor in what the future of retirement looks like," Voris said.
Why $ 1 million is no longer enough
There are a number of factors that can cause retirees to save a bigger nest egg, but one of the most important is people living longer in retirement.
"Retirement could take a long time," said Voris. “That 20 year retirement idea might have been tied to that $ 1 million figure. That is no longer a realistic expectation. That 4% rule that $ 80,000 income bogey is still out there, but you could be retired for 25, 30, 35 years. "
Check Out: 14 Key Signs That You Are Running Out Of Money In Retirement
Discover: 27 most lucrative sideline jobs for people over 50
How To Save $ 1.9 Million On Retirement
“When you tell someone they need to save $ 1.9 million, it can be daunting on the surface. But there is a way to achieve this through planning and decision-making processes that make it achievable, ”Voris said.
The first step is to simply choose to actively participate in your financial planning.
“Be your own lawyer. Be engaged. Start early. Take it seriously. Do you have a plan, ”said Voris. "The attitude towards finances in retirement, whether you have a plan or not, is night and day."
If you're just starting out, make sure you don't leave free money on the table.
“Make sure you get every penny your employer offers, be it a 401 (k) match or a stock purchase plan rebate or HSA contribution match - all of these assets are free. Don't leave any of them off the table, ”Voris said. "Approach open enrollment with this mindset and make sure you get the most out of your employer."
See: States Where Your Retirement Will Cost Less Than $ 45,000 Per Year
Read: 17 Tips For Living Comfortably With Just One Social Security Check
Voris is also supposed to watch out for debts that can cause your retirement plans to fail.
"Be aware of credit card debt, health debt, and have a debt plan if you have multiple cards or a car loan," he said, noting that your plan should focus on paying off high-interest debt first.
You should also have an emergency savings fund so that you do not run into more debt or have to top up your retirement savings in the event of an unexpected strike.
"In practical terms, a life event can be catastrophic for someone on the verge of financial security," Voris said. "When the car breaks down, or you run into medical debt or default on your rental, things like that can really get a kick out of it."
By saving three to six months on living expenses, you can keep your retirement plans on track, even if the worst comes to the worst.
Learn: The Standard Emergency Saving Advice Was Wrong - How Much Do You Really Need?
Find Out: Should You Be Investing Money In Retirement or Your Savings? So you know
Next, Voris said to seek help devising a plan to meet your retirement goals. The Schwab survey found that only 40% of participants in the 401 (k) plan were very confident about the investment decisions they made, compared to 56% who felt very confident about investment decisions made with professional help .
"Take the advice offered," said Voris. “Most 401 (k) recorders have advice and financial wellness accounts, and these things will help a person make a plan. If you have an engagement partner, you have a soundboard. Boosting your self-confidence increases your ability to be successful from a savings and investment perspective. "
Finally, remember that $ 1.9 million is a long-term goal - it's not a lump sum that you expect to save overnight.
"When you think of someone who is 24 or 25 years old, that's a 35 to 40-year job-saving career," said Voris. “It seems daunting - that's a huge number - but the ability to get there when you have a plan and save over a period of 30, 35, 40 years is achievable. This $ 1.9 million [target] should enable you to take small steps and make the right decisions, incrementally. "
More from GOBankingRates
What monetary issues would you like to cover: Ask the financially savvy woman
5 Things Most Americans Don't Know About Social Security
20 Home Renovations That Will Depreciate Your Home's Value
What is the middle class income level in your state?
Last updated: August 4, 2021
This article originally appeared on GOBankingRates.com: $ 1 million is no longer the standard nest egg - that's how most Americans think they actually need to retire
You should check here to buy the best price guaranteed products.
Former Defense Secretary James Mattis told the Elizabeth Holmes jury that 'there came a point when I didn't know what to believe'
Biden meets with divided Democrats on spending plan
Ukraine: World must 'condemn' Crimean occupation
Job training program helps women bake a brighter future
Not Even Ariana Grande Can Save ‘The Voice’
Disturbing Bystander Video Shows Cops Stand By as Dog Mauls Black Man