Many workers are saving for retirement. That’s the good news. The bad news is that many people are not saving enough. In fact, the estimated average retirement account balance is very low and would produce only a small amount of annual income each year.
Here’s what workers have saved and what these savings would actually do for them in their later years.
This is the average savings among workers
According to the Transamerica Center for Retirement Studies, the median estimated retirement savings in the United States is $54,000. This is an estimate of the total household retirement savings in all accounts.
If this number sounds really low, that’s because it is. Retirees are often advised to follow a 4% rule and withdraw no more than 4% of their invested balance during their first year of retirement to ensure they don’t run out of money while still relying on their portfolio for income. For those with average savings who are following this rule to avoid draining their accounts, a $54,000 account would give them just $2,160 to live on each year.
with the average Social Security the benefit comes to $1,661 per month, retirement checks plus withdrawals from the median retirement account would leave seniors living on just $22,092 per year. For most people, that’s not enough to make ends meet, let alone a comfortable retirement.
How to save more than the median
Of course, $54,000 is the average account balance, so some people will have much more saved (and others will have much less). If you want the security you deserve in retirement, you’ll need to aim to become one of the people with a much higher account balance. There are a few key ways it can be configured to do this. Should:
- Set a retirement savings goal. You can do this assuming you’ll need 10 times your pre-retirement salary invested before your target retirement date.
- Break your big goal down into small, manageable monthly goals using the calculator on investor.gov.
- Build your budget around invest a sufficient amount for retirement so you’re prioritizing saving for your later years over any unnecessary spending.
- Set up automatic investments so the correct amount of money is deposited each month into your retirement account.
- Take advantage of accounts that provide tax breaks for retirement savings, such as an IRA or 401(k), to make it easier to invest the required amount.
- Understand the rules for getting an employer-matched 401(k) if you’re eligible for one, so your employer can give you free money to help you save for retirement.
- Invest wisely, building a balanced portfolio of solid investments that you hold for the long term and that expose you to the right level of risk.
By following these steps, you should be able to easily exceed the average retirement account balance of $54,000 so you don’t have to struggle to live on too little as a senior.
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