Do you have a goal number, a dollar amount that you aspire to for your retirement? Most people have one, and over time, that number everyone dreamed of was $1 million. Now, according to a report made by Northwestern Mutual, many US citizens believe that they will need $1.46 million for their retirement.
According to the same study, the number that everyone aspires to in the year 2020 was $951,000, which means that the amount that Americans think they will depend on to retire has increased by 53% in just a few years, in fact, it has increased by a huge 15% since last year.
At the same time, the gap between what people think they’ll need and what they’ve actually saved has never been so wide – Americans, on average, have saved just $88,400 for retirement, according to the Northwestern Mutual report, which is less than the average amount in 2021, when savings peaked at $98,900.
Retirement Savings Falling Short: Away From Their Goals
If you fall into this field and your savings are well below your ideal number, all is not lost, however, you may want to redo accounts and validate your number.
Instead of choosing an arbitrary figure, such as 1 and a half million dollars, do the calculations, take into account how you want to live during your retirement and how much income you will depend on to maintain that lifestyle that you want.
When you retire, your mortgage may be paid off, which will make your monthly expenses less, but you may want to travel more and quite possibly you will have more medical expenses.
Taking all this into account, perhaps you could live comfortably with what you spend per month currently, although increased to take into account inflation between now and the time of your retirement.
Let’s face it, you’re married, and you think you need $6,700 a month, or $80,400 a year, to live comfortably – that’s close to the median income of $80,329 for a two-person household in the United States.
Can You Retire on Less? Why $1.46 Million is the New Benchmark
How will you ensure that you will be able to withdraw this amount from your retirement assets?
Consider all sources of retirement income: You may receive Social Security benefits, and you can check your estimated future benefit by setting up a Social Security account.
In April 2024, the average monthly benefit for retired workers was $1,915.26. By making it count that you and your spouse each receive this benefit amount, you will receive total household benefits of about $45,966 per year.
Taking this into account, now you spend about $34,400 per year withdrawing from your assets, using the 4% rule, this means that you spend about $860,000 between you to achieve the desired standard of living during retirement.
Constant saving can get you there, this is substantially less than $1.46 million, but it is well above the average savings of most American citizens, if you can save for 30 years and have a 7% return on your investments, it takes to make a savings of about $705 per month, or a little more than 10% of an income of $6,700 monthly, to get it, If you have less time, you will need to save more.
In general, it is an excellent idea to start making savings early in the years when you generate income, and make a saving of 10% of your income, that is a good starting point, once you can afford a comfortable standard of living, make an effort to save more, instead of spending more as your annual income increases.
