A sizeable number of Americans hope to retire with $1 million, according to Bankrate’s latest savings survey. While that can seem like a lofty goal, it’s possible to achieve it with the right planning. A little over a third of American workers believe they’ll need $1 million or more to retire in comfort.
The median amount they think they’ll need saved up is about $875,000. Among generational cohorts, millennials are the most likely to think they’ll need to save up at least $1 million to retire comfortably. The numbers show that it can be possible to reach this goal, even if you only start preparing at, or after, age 30.
While figuring out how much you’ll need to retire depends on personal factors such as where you plan to live or how often you’ll want to travel, the key to reaching your retirement savings goal is consistent saving. “It’s important to realize that saving for retirement is more like a marathon rather than a sprint,” Matt Schulz, chief credit analyst at LendingTree, tells Make It. “If you don’t keep at it, you risk getting discouraged and stopping the process before you really get anywhere.”
With that in mind, calculations show how much you would need to save each month to retire with $1 million at age 65, starting at ages 25, 30, 35, and 40.
Note that these calculations assume a beginning balance of $0 and don’t account for unexpected life events such as market volatility, layoffs, or promotions. Starting at age 25, earning a 5% annual rate of return, you would need to save $655 per month. Earning a 7% return, you would need to save $381 per month.
And earning a 9% return, you would need to save $214 per month. Starting at age 30, earning a 5% annual rate of return, you would need to save $880 per month. Earning a 7% return, you would need to save $555 per month.
And earning a 9% return, you would need to save $340 per month. Starting at age 35, earning a 5% annual rate of return, you would need to save $1,202 per month.
Planning for a $1 million retirement
Earning a 7% return, you would need to save $820 per month. And earning a 9% return, you would need to save $546 per month. Starting at age 40, earning a 5% annual rate of return, you would need to save $1,679 per month.
Earning a 7% return, you would need to save $1,234 per month. And earning a 9% return, you would need to save $892 per month. As the calculations demonstrate, the sooner you start saving for retirement, the less money you need to set aside each month.
The good news is that even if you aren’t able to begin setting aside funds until you’re 40, you could still retire with $1 million by substantially increasing your monthly contributions. Although having an overall retirement savings goal can be helpful, the number in your account can vary due to factors beyond your control such as market fluctuations. Thus, focus on what you can control, such as the percentage of your annual income you consistently contribute toward your retirement investment accounts.
Generally, aim for consistent contributions, according to Fidelity Investment, one of the country’s largest 401(k) providers. If you’re in your 30s or 40s and have nothing put away yet, you will likely need to substantially boost your contribution rate to catch up, advises Anne Lester, a retirement expert. Don’t know how much you’ll need to retire?
You’re not alone. Almost a quarter of workers are in that camp, according to Bankrate’s survey. Make It’s calculator can give you an estimate of how much you may need, as well as how much to save monthly to reach that goal, based on factors including your age, how much you have saved already, and your income.
Among the first necessary or helpful steps along the journey toward success is to identify a goal and to have a plan and process,” says Mark Hamrick, Bankrate’s senior economic analyst. “To do anything else is the financial equivalent of driving without a seatbelt, or worse, with blinders on.”
Taking proactive steps now can ensure you reach your retirement goals comfortably, no matter when you start.
