In the analysis conducted in the fourth quarter of 2023, for 30-year-old account owners it was approximately $20,400, according to data from Fidelity Investments, the largest 401(k) retirement provider in the country. This is far from the $1.46 million that the average American citizen thinks they need to retire peacefully, according to Northwestern Mutual’s 2024 Planning and Progress study.
The earlier you start saving for retirement, the better, as the calculations above show. This is because your savings have more time to increase, thanks to the power of compound interest. Something that is important is not to focus only on the balance of your account, as it can be affected by many factors that get out of your hands, such as market fluctuation.
How Much to Save to Make Your Retirement Plan Effective?
If you are 30 or older, there is still time to save for a good retirement. Even as a millionaire, you may need to save a little more monthly than if you had started at the age of 20, but there is still time to resume your retirement plan.
- If you start your retirement plan at 25 years old:
- Earning a 6% annual rate of return: $2,001,448.
- Earning an 8% annual rate of return: $3,514,281.
- If you start your retirement plan at 30 years old:
- Earning a 6% annual rate of return: $1,431,834.
- Earning an 8% annual rate of return: $2,306,175.
- If you start your retirement plan at 35 years old:
- Earning a 6% annual rate of return: $1,009,538.
- Earning an 8% annual rate of return: $1,500,295.
Experts recommend focusing on your savings rate, which means looking at your percentage of annual income that contributes to your retirement, just as Fidelity recommends valuing a savings rate of at least 15 percent, including your employer’s contributions. It doesn’t matter if you start your retirement fund with little, the really critical thing is that step by step you increase it so that you see a better result in your future retirement.
There is still time left for your retirement to arrive, so there is time to start your retirement fund and achieve retirement as a millionaire.
Just remember that if you start after the age of thirty, you must do so with a higher savings rate than if you had started the retirement plan earlier.
As Anne Lester, retirement expert and author of “Your Best Financial Life: Save smart now for the future you want,” told CNBC in March.
At What Age Can I Retire in the United States?
In the United States, the retirement age varies depending on the year you were born and the type of benefit you qualify for. In general, the normal retirement age for workers who were born in 1960 or later is 67 years. However, you can choose to retire earlier with reduced benefits starting at age 62 or wait beyond age 67 to increase your benefits. If you can wait, do it, because your monthly check will be bigger, au contraire, it will be reduced.
For example, if you were born in 1960 or later and decide to retire at age 62, your monthly benefits would be reduced by about 30%. On the other hand, if you wait until age 70 to retire, your benefits could increase by 24% compared to the benefits you would be entitled to at age 67.
It is important to mention that these percentages may vary slightly depending on your year of birth and other factors. In addition, some workers may choose to retire early due to specific medical or work circumstances, which may affect the calculation of their retirement benefits.