Average Retirement Savings
Retirement is a financial goal most of us think about. At some point, everyone will be forced to leave the workforce for good. But, how much will you actually need to retire?
According to the Federal Reserve’s Survey of Consumer Finances, as of 2019, the average retirement savings account had $426,000 for people ages 65 to 74. For people over the age of 75, the number checked in at $357,000. These figures include funds in retirement accounts, such as 401(k) plans and IRAs.
Retirees’ average net worth was higher, at approximately $1.2 million for ages 65 to 74. This is due to the fact that a person’s net worth includes additional assets such as property, stock holdings, life insurance policies, and more.
How Much Will I Need?
The amount you will need to comfortably retire depends on a number of factors, including when you plan to retire and what you would like your lifestyle to look like during your retirement years. The answers to those questions will indicate how much time you have to save, and how much you’ll need to have in total.
Generally speaking, retirement planners recommend building up a nest egg of $1 million prior to retirement. But, if you’re comfortable living a more modest lifestyle, less than $1,000,000 is likely acceptable. Individuals who want to travel often or leave a significant sum to their children might consider shooting for more than $1 million.
Another thing to keep in mind is the cost of healthcare during your retirement. This is typically a significant expense that can take a big bite out of your savings.
When it comes to saving for retirement, consider reverse engineering your retirement goal. This means setting aside some time to visualize your ideal golden years. How will you spend your days, and where will you live? From there you can more easily begin to estimate both monthly and annual expenses, and work the math to determine your target amount.
Planning for retirement is like hiking to a specific destination. Without a trail map, you run the risk of veering off course and getting lost, but with a plan and path to follow, you’ll be better prepared and more likely to reach your goal.
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