Workers are often warned not to rely too heavily on Social Security and instead, take steps to build savings to bring with them into retirement. And your goal may be to amass a large nest egg -- one that supports your many retirement goals.
But are you aiming for $3 million in retirement savings? You may not be. After all, that's a pretty large number to target. But if you play your cards right, you could end up sitting on upwards of $3 million by the time your senior years roll around.
What will investing $400 a month do for you?
If you have access to an IRA or 401(k) plan, your goal may be to get as close as possible to maxing out your annual contributions. But even if you can't do that, if you can part with $400 a month over the duration of your working years, you can build serious wealth.
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In fact, if you sock away $400 a month over a 43-year period, and your invested savings generate an average annual 10.5% return, then you'll end up with $3.3 million. And that should be enough money to enjoy retirement to the fullest.
Of course, that begs the question: How do score an average yearly 10.5% return on your investments? The quick answer is that that return is by no means guaranteed. But if you load up on S&P 500 index funds and hold them for many years, there's a good chance you'll see a return in that ballpark.
From 1957 through 2021, the S&P 500 index graced investors with an average annual return of 10.5%. Now to be clear, that doesn't mean the index performed consistently well every single year during that period. In fact, it ended several years during that time in the red.
Rather, that average annual 10.5% return accounts for both strong years on the part of the index and years during which it underperformed. But if you're talking about investing in the broad market for 40-plus years, then there's a good chance your portfolio will enjoy a comparable return.
Commit to saving early on
Some people don't start focusing on retirement savings until they reach their 30s, 40s, or even beyond. But if your goal is to amass millions for your senior years, and you don't want to part with a ton of money on a monthly basis to make that happen, then you'll need to start early.
In our example, we used a 43-year savings window. That's reasonable if you start dedicating funds to your retirement savings at age 24 with the goal of retiring at 67, which is full retirement age for Social Security purposes if you were born in 1960 or later.
If you don't manage to start saving for retirement until age 30, and you can't swing more than $400 a month in your IRA or 401(k), then you may need to work until your early 70s to hit that $3 million target. The point, either way, is that it doesn't take a huge sum of money on a monthly basis to amass a lot of wealth. It just takes a lengthy savings window and the right investment.
FAQs
How Much Should a 70-Year-Old Have in Savings? Financial experts generally recommend saving anywhere from $1 million to $2 million for retirement. If you consider an average retirement savings of $426,000 for those in the 65 to 74-year-old range, the numbers obviously don't match up.
What is the average 401k balance for a 65 year old? ›
Is $3 million enough to retire at 40? ›
Depending on your goals and plans, $3 million can be enough to cover early retirement at 40. However, certain factors will affect whether $3 million is enough. For example, your retirement needs and life expectancy play a big role. Here's how to invest it to cover healthcare, housing and lifestyle.
How much money do you need to retire comfortably at age 65? ›
For a 25-year retirement, you'd need just over $2 million in Hawaii — the most of all states by far. That's followed by Massachusetts, California and New York, along with 12 other states where you'd need at least $1 million saved up to retire.
How much does the average 65 year old retiree have in savings? ›
Average retirement savings balance by age
| Age group | Average retirement savings balance amount |
|---|
| 35-44 | $141,520 |
| 45-54 | $313,220 |
| 55-64 | $537,560 |
| 65-74 | $609,230 |
1 more rowMar 5, 2024
According to a 2020 working paper from the Center for Retirement Research at Boston College, the top 1% of retirees-which a retiree with $4 million in assets would fall into-can expect to pay about 22.7% in state and federal taxes.
Can I retire at 62 with $400,000 in 401k? ›
If you have $400,000 in the bank you can retire early at age 62, but it will be tight. The good news is that if you can keep working for just five more years, you are on track for a potentially quite comfortable retirement by full retirement age.
Can I retire at 60 with 300k? ›
£300k in a pension isn't a huge amount to retire on at the fairly young age of 60, but it's possible for certain lifestyles depending on how your pension fund performs while you're retired and how much you need to live on.
What does the average American retire with in their 401k? ›
Average 401(k) Balance by Age
| Age | Average 401(k) Balance | Median 401(k) Balance |
|---|
| 35 to 44 | $97,020 | $36,117 |
| 45 to 54 | $179,200 | $61,530 |
| 55 to 64 | $256,244 | $89,716 |
| 65 and older | $279,997 | $87,725 |
2 more rowsSep 7, 2023
Low-income people may retire by cutting their expenses, downsizing their homes, taking Social Security benefits early, and/or applying for financial assistance through government benefit programs.
Age 66 – Full Social Security retirement age begins for most Baby Boomers. Age 67 – Full retirement age for Social Security benefits if born in 1960 or later. Age 70 – To increase monthly benefits delay claiming Social Security payments until 70. Age 72 – Minimum distributions from 401(k) plans and IRAs are required.
How much social security will I get if I make $75,000 a year? ›
If you earn $75,000 per year, you can expect to receive $2,358 per month -- or about $28,300 annually -- from Social Security.
What is the average Social Security check? ›
Social Security offers a monthly benefit check to many kinds of recipients. As of December 2023, the average check is $1,767.03, according to the Social Security Administration – but that amount can differ drastically depending on the type of recipient. In fact, retirees typically make more than the overall average.
What is a good monthly retirement income? ›
Average Monthly Retirement Income
According to data from the BLS, average 2022 incomes after taxes were as follows for older households: 65-74 years: $63,187 per year or $5,266 per month. 75 and older: $47,928 per year or $3,994 per month.
How much money do most people retire with? ›
Key findings
- In 2022, the average (median) retirement savings for American households was $87,000.
- Median retirement savings for Americans younger than 35 was $18,800 as of 2022.
- 62% of Americans aged 18 to 29 have some retirement savings, but only 30% percent feel on track for retirement.
Average net worth by age
| AGE OF HOUSEHOLDER | AVERAGE NET WORTH | NET WORTH (EXCLUDING HOME EQUITY) |
|---|
| 55 to 64 years | $743,100 | $556,500 |
| 65 to 69 years | $8,046,000 | $593,200 |
| 70 to 74 years | $821,000 | $593,000 |
| 75 and over | $761,000 | $519,300 |
3 more rowsNov 16, 2023
According to data from the BLS, average 2022 incomes after taxes were as follows for older households: 65-74 years: $63,187 per year or $5,266 per month. 75 and older: $47,928 per year or $3,994 per month.
How much does the average 72 year old have in savings? ›
The above chart shows that U.S. residents 35 and under have an average of $30,170 in retirement savings; those 35 to 44 have an average $131,950; those 45 to 54 have an average $254,720; those 55 to 64 have an average $408,420; those 65 to 74 have an average $426,070; and those over 70 have an average $357,920.
Can I retire at 72 with 500k? ›
The short answer is yes, $500,000 is enough for many retirees. The question is how that will work out for you. With an income source like Social Security, modes spending, and a bit of good luck, this is feasible. And when two people in your household get Social Security or pension income, it's even easier.
