The key to financial wellness can be a cool half million. While the factors that determine financial stability can be different for every investor and retirement saver, a recent Empower Retirement and Personal Capital survey found that most Americans believe they need more than $500,000 in savings to become financially healthy. The survey, conducted by The Harris Poll, interviewed 2,005 people from different age groups, racial and ethnic backgrounds, life stages and employment sectors to get their views on financial well-being.
A financial advisor can help you create a plan to reach your financial goals, whether it’s saving $500,000, saving for college, or buying a home. SmartAsset’s matching tool can match you with up to three local advisors in just five minutes. If you’re ready to find a counselor, start now.
$516K: The Magic Number for Financial Wellness?
The poll found that Americans’ views on financial well-being evolve as they move through different phases of life or experience major “perspective-changing events.” However, Americans believe the average amount of money needed to achieve financial well-being is $516,433, according to the survey.
The survey found that Americans don’t feel financially healthy until age 47. Additionally, they said age 49 is when they think other people feel financially healthy.
“While many Americans believe financial prosperity is within reach, fewer than half say they are financially healthy today,” the survey says.
From Broke College Grad to Half a Million at Age 47
So how does one save $500,000 after starting with next to nothing? Consider a 22-year-old college graduate named Nicole. Despite graduating with minimal debt, he starts with just $100 to invest. Using SmartAsset’s investment calculator, she could determine exactly how much she would need to invest each year to reach her goal of saving over $500,000 by age 47.
Assuming an 8% annual rate of return, Nicole would need to invest $7,050 annually to have over $516,000 in 25 years. This means that every month he will have to set aside $587 to invest. Nicole’s ability to save at this rate, of course, depends on a number of factors, including her income, her expenses, her budget, and the cost of living in her area.
Saving $500,000 despite starting later
Of course, not everyone can start investing right out of college. Tens of millions of Americans are saddled with student loan debt and owe a total of $1.73 trillion, according to EducationData.org. Even if a college graduate can’t start investing until they pay off their loans, the person can achieve a perceived level of financial well-being by age 47 by putting more emphasis on their savings rate.
Derrick, a 30-year-old college graduate who just finished paying off his student loans, has less time to invest than Nicole, so he should invest more money each year. Starting with just $100 and at an average rate of return of 8%, Derrick would need to invest $15,300 each year or $1,275 per month to have more than $516,000 saved by age 47. Again, this may be easier said than done depending on Derrick’s potential costs and earnings.
Barriers to achieving financial well-being
For many Americans, saving and investing thousands of dollars a year can be daunting. The Empower Retirement and Personal Capital survey found that nearly 7 in 10 Americans face at least one obstacle in their financial lives, while the average person faces at least two.
Some 27% of survey respondents said not being paid enough is the main obstacle they face, while another 23% said having too many expenses is the main obstacle they face. Overall, 19% of people said they were “not in a place where I can save”.
But Americans are willing to take a helping hand. Nearly 80% of respondents said they need help optimizing their financial well-being, highlighting the need that financial advisors fill. Of those people, 32% said they could use help paying off debt, while 30% said they want help building an emergency fund. The survey found that 28% of respondents said they needed help with their investment strategy.
What financial wellness means to you will likely differ from the next person. But the average American believes they need more than $516,000 to become financially healthy. By investing early and often, this savings goal is achievable. While a number of roadblocks can prevent ordinary Americans from reaching financial prosperity, creating a plan and sticking to it can help them achieve investment success. Expert financial advice can also help investors create a winning game plan.
Financial wellness tips
Get financial advice from experts. About 78% of Americans said they need help optimizing their financial well-being, according to the Empower Retirement and Personal Capital survey. A financial advisor can help you create a plan to reach your financial goals, whether it’s saving $500,000, saving for college, or buying a home. SmartAsset’s matching tool can match you with up to three local advisors in just five minutes. If you’re ready to find a counselor, start now.
Start by asking yourself basic questions. Sticking to a budget? If not, create one using SmartAsset’s budget calculator. Do you have an adequate emergency fund? Experts recommend spending savings between three and six months. Are you on track to retire when you want? If you’re not sure, check out our retirement calculator to track your progress.
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