Everyone considering retirement has the same question: How much money do I need to maintain my standard of living?
First, you should know that there is no such thing as a “magic number”.
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For many years, people believed that the goal was $1 million. They believed this would be enough to see them through their retirement years without having to change their lifestyle.
For some, this may still be the case. For others, more or less than $1 million may be needed.
A study to help you set a goal
According to Northwestern Mutual’s 2023 Planning and Progress Study, Americans believe they will need $1.46 million to retire comfortably.
If that number sounds high, there’s bad news: It’s an increase of $419,000 (almost half a million!) from a similar study conducted in 2020 and $190,000 from 2023.
“Americans’ magic number for retirement readiness continues to rise,” said Aditi Javeri Gokhale, chief strategist, president of retail investments and head of institutional investments at Northwestern Mutual. “The good news is that they are saving and investing more for tomorrow, even in this time of high inflation and market volatility. This is a step in the right direction and a reversal of what we saw last year when the gap widened rather than narrowed. The challenging news is that there continues to be a large disparity between what they think they will need in retirement and what they have saved to date.
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In 2022, the average American household’s median retirement savings was $87,000. Of course, that doesn’t mean much without the context of age.
Here are the average retirement savings by age now:
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Younger than 35: $18,880
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35 to 44: $45,000
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45 to 54: $115,000
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55 to 64: $185,000
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65 to 74: $200,000
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Older than 74: $130,000
What’s the deal with $1 million as a magic number?
A million dollars went further in the past than it does today, but remember this: There was never a time when this was a one-size-fits-all magic number for retirement savings.
Instead, how much you should save should be based on:
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Anticipated Lifestyle in Retirement: Consider your daily living expenses, desired trips and hobbies.
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Expected health care costs: Factor in routine medical care and potential long-term care needs.
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Retirement age: Determine how it affects how long your savings should last.
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Estimated inflation rates: Understand their impact on the future value of your savings.
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Additional sources of income: Social security accounts, pensions or part-time work in retirement.
It would be much easier to save for retirement if there were a magic number, but there isn’t one. The best you can do is look at your situation as a whole – with a focus on your current savings and age – to set a goal.
Consulting a financial advisor can help you better understand how much money you need to save for retirement. A professional can provide personalized advice to help you make the best possible decisions.
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*This information is not financial advice and personalized guidance from a financial advisor is recommended to make well-informed decisions.
Chris Bibey has written about personal finance and investing for the past 15 years in a variety of publications and for a variety of financial companies. He is not a licensed financial advisor and the content herein is for informational purposes only and does not constitute and does not constitute or is intended to constitute investment advice or any investment service. While Bibey 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 Raising Retirement Savings Goal: $1.46 Million Now Seen as the ‘Magic Number’ originally appeared on Benzinga.com
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