If the consensus goal for US retirement savings was once $1 trillion, that appears to be changing. A recent survey by Schwab Retirement Plan Services found that 401(k) plan participants across the country now believe they need to save $1.9 million for retirement. The online survey, handled by Logica Research, conducted 1,000 interviews with plan participants aged between 21 and 70 and measured confidence levels in achieving their own retirement goals. Whether you’re just starting to save or you’re quickly approaching retirement age, a financial advisor can help you put together a plan.
Retirement Survey Results
In 2019, the same Schwab survey found that 401(k) participants had a retirement savings goal of $1.7 million. This goal has since grown and so has investor confidence in achieving their goals. More than half (53%) of survey respondents said they are likely to achieve their retirement goals, up 16% from a year ago, when the COVID-19 pandemic unleashed massive financial turmoil and uncertainty.
“We’ve experienced tremendous stress at work and at home this past year, which has underscored the importance of financial wellness and the value of trusted advice,” Catherine Golladay, head of Schwab Workplace Financial Services, said in a statement.
But 401(k) plan participants say they still face many challenges. In fact, 61% said they needed the kind of professional advice a financial advisor can provide, including help with calculating a retirement savings goal, investing, building retirement income and retirement tax planning.
How to Save $1.9 Million for Retirement
While the prospect of saving $1.9 by retirement seems daunting, saving early and often will increase your chances of reaching that goal. Tax-advantaged accounts like 401(k)s and 403(b)s offered through employers can help you build a nest egg over the years. While annual contributions to these types of plans are capped at $19,500 in 2021 (with a cap of $6,500 for those 50 and over), those saving for retirement can also contribute $6,000 ($7,000 if you’re over 50) to an individual retirement account (IRA) each year. Those saving for retirement may also want to investigate whether a mega backdoor Roth IRA is right for them.
Every three years, the Federal Reserve examines changes in U.S. family finances, including how much people have saved in retirement accounts at various points in their lives. Using data from the Federal Reserve’s 2019 Survey of Consumer Finances, the Center for Retirement Research at Boston College calculated median retirement savings across various age groups:
Average 401(k)/IRA for ages 35-44: $51,000
Average 401(k)/IRA for ages 45-54: $90,000
Average 401(k)/IRA for ages 55-64: $120,000
See how much someone with the median 401(k)/IRA balance at ages 35, 45, and 55 would have to save in total to reach the $1.9 million mark by age 65 (these projections assume annual rate of return 8%) :
Build $1.9M Nest Egg Age 401(k)/IRA Balance Monthly Savings Retirement Savings at Age 65 35 $51,000 $900 $1,899,046 45 $90,000 $2,475 $1,905.23 $1,905.23
A 35-year-old who has already saved $51,000 for retirement is clearly in the best position and would have to withdraw $900 a month over the next 30 years to get close to the $1.9 million mark. Older workers should save much more each month. A 45-year-old with $90,000 in savings needs to earn $2,475 a month to break the $1.9 million threshold by age 65. month to achieve their goal within 10 years.
A million dollars ain’t what it used to be. It was once considered a retirement savings milestone, but 401(k) plan participants now think they’ll need nearly twice as much, according to research from Schwab Workplace Financial Services. Building a nest egg that large will likely take time and planning, underscoring the importance of saving for retirement in your 20s and 30s.
Retirement Savings Tips
SmartAsset has a variety of tools that can help you plan for retirement. Our 401(k) calculator can show you how much your account will be worth by the time you retire. In the meantime, our retirement calculator can help you determine if you’re on track to reach your retirement goals.
Need help managing your investments? How about retirement income planning? A financial advisor can help you with a myriad of financial needs, and finding one in your area doesn’t have to be difficult. Finding a qualified financial advisor doesn’t have to be difficult. SmartAsset’s free tool matches you with up to three financial advisors serving your area, and you can interview your advisors at no cost to decide who is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Don’t forget to make 401(k) match contributions to your company’s 401(k) match if one is available. Otherwise, like one-third of Americans, you’re leaving free money on the table.
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