For decades, many savers have had the same goal in mind for their retirement future: 1 million dollars. If you and your 401(k) plan have ridden through the market and made it out with $1 million, that’s great! For those that are still working towards that $1 million retirement savings, we have some bad news. $3 million is the new rule of thumb.
Why the New Target?
The reason for the new retirement goal boils down to inflation and mathematics.
If you retired today at 65 years old with $1 million and no social security, you would only be able to spend $40,000 to $50,000 a year for 25 years before running out of money. This may seem doable for a couple with absolutely no debt, medical expenses, or any additional “golden year” spending.
If you double that, $80,000 a year is starting to get there. When you move up to $3 million, you now have $120,000 of spending a year. If your retirement plans are luxurious traveling and dining, then this becomes much more realistic. The difficulty is now figuring out how to reach this goal.
How to Achieve this $3 Million Goal
NerdWallet calculated the numbers, broken down by age group, to demonstrate how much is needed to be saved each month to retire with $3 million. They started with these 3 assumptions:
- You’re starting with no savings.
- Your investments will earn 6% annually.
- You’re retiring at age 67.
Starting at 20 years old, you would have to save $958 every month for 47 years to retire with $3 million. If you don’t get started until 30 you would have to save $1,839 every month for 37 years. A 40 year old would have to save $3,720 every month for 27 years, and if you start at 50, you have to set aside $8,493 every month for 17 years to retire with $3 million.
The earlier you start saving, the more you will benefit from compound interest. Not only will you get maximum returns on your investments, but you can also get returns on your returns.
The problem is that it’s rare for a 20 year old to 1) have a retirement plan or 2) be able to set aside almost $1,000 a month. Most 20 year olds are in the middle of college and when they get out, they’re going to be focusing on finding a job to pay off student loans.
Not only is this unrealistic for young people, but also for women, as they significantly lag behind their male counterparts in preparing for retirement. The reason being that women make up the majority of the part-time, low-wage workers and are less likely to participate in workplace retirement plans.
How CKS Summit Group Can Help
As we’ve just learned, saving enough for a successful and relaxing retirement is only getting more difficult. While it is possible to do it on your own, retirement income advisors can make the process much easier.
At CKS Summit Group, we focus on bringing fresh and new ideas to retirement income. Our experienced retirement planning professionals are reliable, trustworthy, and get to know your individual situation to create a plan designed specifically to help you reach the future you want.
While we serve both men and women aged 35+, we also have a unique focus on retirement planning especially for women. If your situation requires a professional’s help, contact us here today to make sure your golden years are the best they can possibly be.
