For decades, the $1 million retirement savings goal has been considered the gold standard for a secure and comfortable post-work life. However, the reality for most Americans is quite different.
According to the latest Survey of Consumer Finances by the Federal Reserve, only about 10% of American retirees have managed to save $1 million or more. This leaves a significant 90% who do not reach this milestone.
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The average retirement savings account balance for all American households, including all age groups, is currently just $87,000.
Generation X, born between 1965 and 1980, faces a number of unique challenges related to retirement savings. The average retirement savings for Gen X is around $40,000, which is extremely low compared to what they believe they need. On average, Gen Xers think they’ll need about $1.1 million to retire comfortably. However, they expect to have only about $661,000 saved from retirement, highlighting a significant gap in their retirement planning.
This generation is in a tricky position. They are the first to rely more heavily on 401(k) plans and IRAs instead of traditional pensions, making them more susceptible to market fluctuations.
Baby Boomers ages 58 to 77 are in or nearing retirement. Average retirement savings for Boomers is about $120,000, while average savings are higher at about $306,000. Despite being closer to retirement, many Boomers still find themselves far from their retirement goals. They estimate they need about $1 million, but often fall short due to financial and economic challenges.
NerdWallet reports that those between the ages of 65 and 74 hold an average of $609,230 in retirement savings, with a median of $200,000. That figure is still well below the $1 million target, and many retirees need to adjust their living expectations significantly.
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So what sets the 10% apart that reach $1 million? There are a few key strategies that have proven effective:
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Starting early: Mixing power is important. For example, saving $400 a month starting at age 25 can grow to $1 million by age 65, assuming a 7% annual return.
While $1 million is a common goal, determining what “enough” means to you personally is key. This involves careful planning, taking into account life expectancy, health care costs and desired lifestyle. By setting realistic goals and working with a financial advisor, you can develop a retirement plan that matches your specific needs and risk tolerance.
If you’re on track to hit your $1 million goal, that’s fine. What is enough for some may be different for others. Consulting with a financial advisor can provide personalized guidance, helping you set achievable goals and create a strategy tailored to your circumstances. With discipline, strategic planning, and realistic expectations, you can work toward a retirement that fits your unique situation, even if reaching $1 million remains out of reach for many.
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*This information is not financial advice and personalized guidance from a financial advisor is recommended to make well-informed decisions.
Jeannine Mancini has written about personal finance and investing for the past 13 years in a variety of publications including Zacks, The Nest and eHow. She is not a licensed financial advisor and the content herein is for informational purposes only and does not and does not constitute or purport to constitute investment advice or any investment service. While Mancini believes that the information contained herein is reliable and derived from reliable sources, it makes no representation, warranty or undertaking, expressed or implied, as to the accuracy or completeness of the information.
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This article What percentage of people retire with a $1 million nest egg? It’s Much Less Than You’d Expect originally appeared on Benzinga.com
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