According to a recent analysis, Americans who want to stretch their retirement savings might want to go to states in the Midwest or South.
Around the U. S. a $1 million savings account can support 18 9 years worth of living expenses, GoBankingRates found. However, the length of time your money lasts depends greatly on where you retire; it can be as short as ten years in Hawaii or as long as twenty years in more than a dozen states.
The personal finance website used government data to calculate how long retirees 65 and older could live on $1 million in savings, taking into account the costs of housing, transportation, utilities, health care, and groceries in each of the 50 U.S. S. states.
The main conclusion is that Mississippi offers retirees the best value for their money, with annual costs of $44,000 for housing, food, utilities, health care, and other necessities. According to the personal finance website, you could save $1 million in the state and use it for almost 23 years.
In contrast, GoBankingRates estimates that retirees in Hawaii, where annual living expenses are nearly $97,000, or more than twice as high as those in Mississippi, will spend $1 million in less than ten years.
It’s important to remember that most Americans do not even come close to having that much money saved. Data from the financial services firm Credit Karma indicates that baby boomers have saved a median of $120,000 for retirement, compared to nearly 200% of people aged 25 and above who have saved nothing for their golden years.
That’s despite the reality that, according to financial services company Fidelity, many retirements now last longer than 25 years. Those meager savings also fall well below the $1. According to a recent Charles Schwab poll, 8 million Americans believe they need to save 8 million dollars to comfortably live out their golden years.
Saving for retirement is a crucial aspect of financial planning, and the common advice often suggests aiming for a $1 million nest egg. However, this target can feel overwhelming, leading to feelings of inadequacy for those who haven’t reached this level. The reality is that only a small percentage of Americans actually have $1 million saved for retirement. This article delves into the statistics surrounding retirement savings, explores personal savings goals, and offers strategies to boost your retirement savings.
Only 10% of Americans Have $1 Million Saved for Retirement
While aiming for a $1 million retirement nest egg may be a popular aspiration, the truth is that only 10% of Americans have actually achieved this goal. This statistic highlights the significant gap between the ideal and the reality of retirement savings for the majority of the population.
Average Retirement Savings Fall Short of $1 Million
According to the Federal Reserve Survey of Consumer Finances, the average retirement account balance in the United States as of 2019 was $255,130. However, this figure only reflects money saved in tax-advantaged retirement plans like IRAs, 401(k)s, and similar accounts. It excludes savings in regular accounts, investment properties, or home equity.
While $255,130 may seem like a substantial amount, it’s important to consider that this is just an average. The median retirement savings, which represents the midpoint of the data, is significantly lower at $65,000. This indicates that a large portion of the population has saved considerably less than the average, while a smaller group has accumulated significantly more.
Factors Influencing Retirement Savings
Several factors can influence the amount individuals have saved for retirement:
- Income: Higher-income earners tend to have larger retirement savings due to their greater earning capacity.
- Homeownership: Homeowners typically have more retirement savings than renters, as home equity can be a significant asset.
- Education: College graduates generally have more retirement savings than those with a high school diploma.
Setting Your Personal Retirement Savings Goal
Retirement savings are highly personal, and the ideal amount you need will vary based on several factors:
- Cost of living in your desired retirement location: Living expenses in different locations can vary significantly, impacting your retirement budget.
- Desired lifestyle: Your retirement lifestyle, whether it involves extensive travel or a more modest approach, will influence your financial needs.
- Ability to save: Your current financial situation and ability to prioritize long-term savings over immediate wants will impact your savings potential.
- Expected investment returns: The rate of return you can achieve on your investments will influence how much you need to save to reach your goals.
- Budgeting skills: Your ability to manage your finances effectively and live within your means will play a crucial role in maximizing your savings.
- Social Security and pension income: The amount of income you expect to receive from Social Security and pensions will contribute to your overall retirement income.
Strategies to Boost Your Retirement Savings
While reaching a $1 million nest egg may seem challenging, several strategies can help you maximize your savings and increase your chances of achieving a comfortable retirement:
- Accurate budgeting: Creating a detailed budget that accurately reflects your expenses is crucial for understanding your financial situation and identifying areas where you can save.
- Maximize tax-advantaged accounts: Contribute as much as possible to tax-advantaged retirement accounts like 401(k)s, especially if your employer offers a matching contribution.
- Harness the power of compound interest: Start saving early and consistently to benefit from the power of compound interest, which allows your earnings to grow exponentially over time.
- Invest prudently and consistently: Develop a sound investment strategy and stick to it, even during market downturns. Aim for a diversified portfolio that aligns with your risk tolerance and time horizon.
- Set aside a significant portion of your income: Aim to save at least 10-15% of your income for retirement, and consider increasing this percentage as your income grows.
- Invest windfall income: Allocate unexpected income sources like tax refunds, raises, and bonuses towards your retirement savings.
While only a small percentage of Americans have $1 million saved for retirement, it’s crucial to focus on maximizing your own savings potential. By understanding the factors influencing retirement savings, setting realistic goals, and implementing effective strategies, you can increase your chances of achieving a comfortable and financially secure retirement. Remember, every dollar saved today can make a significant difference in your future.
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At CBS MoneyWatch, freelance reporter Elizabeth Napolitano covers business and technology news. She also writes for CoinDesk. She worked on the Associated Press web scraping team and interned at NBC News BizTech Unit prior to joining CBS.
Long-term nursing care is generally not covered by Medicare. Although you can apply for Medicaid to cover long-term care costs, your assets will determine your eligibility. Should your net worth be excessively high, you might need to sell off some assets in order to meet the requirements. To help you financially prepare for that situation, you can buy long-term care insurance or a hybrid policy that combines life insurance and long-term care.
Using an online retirement savings calculator can help you work out how much you need to save to retire with $1 million. You can also try some of these tips to boost your savings total:
Your net worth is calculated by subtracting your liabilities from your assets. When it comes to retirement, having more assets than debts is indicated by a higher net worth, which is advantageous.
These numbers are from 2019 and may not reflect any retirement gains (or losses) retirees have experienced in the last few years. The next Survey of Consumer Finances is set to be released sometime in 2023 and it may paint a very different picture of retiree savings with the impacts of the COVID-19 pandemic and higher inflation factored in.
A well-defined strategy is imperative to attain your retirement savings target of $1 million or more. First, figure out how much you need to save each month or year, depending on when you want to retire, to achieve your goal.
What percentage of retirees have 1.5 million dollars?
Can you retire on 1 million dollars?
Here’s How Far It Will Go Saving a million dollars is doable if you start early, and it could last you decades in retirement. Can You Retire on $1 Million? Factors such as housing and health care will also impact your budget and determine whether $1 million is the right savings goal for your needs.
How much money do retirees have?
However, not a huge percentage of retirees end up having that much money. In fact, statistically, around 10% of retirees have $1 million or more in savings. The majority of retirees, however, have far less saved.
Do all Americans need to save $1 million to retire comfortably?
While not all Americans will need to save $1 million to retire comfortably, the unfortunate truth is that most Americans are behind their goals, whatever they may be. The Federal Reserve Survey of Consumer Finances records retirement savings data across different age groups in the United States.
How much money do Americans save for retirement?
Using an expansive definition, Americans averaged $310,792.90 in savings. The median American adult had $13,000 using a strict reading of retirement savings, and $29,000 with the more expansive definition. The top 1% of households had $2,290,000 and $5,061,900 earmarked for retirement, respectively.