The stats say: The average baby boomer in America has $120,300 in retirement savings: 1 hack to increase that number and avoid relying on Social Security down the road. | The motley fool

A nest egg of $120,300 might not get you very far. Here’s how to do better.

The more money you have in retirement, the more you can enjoy your last few years to the fullest. And it may or may not surprise you to hear that Americans, on average, think they’ll need $1.46 million to retire comfortably, according to a recent survey by Northwestern Mutual.

At the same time, older Americans approaching retirement clearly have a big gap to fill if $1.46 million is indeed the magic number. That’s because the average baby boomer today has just $120,300 saved, according to the Northwestern Mutual report that labels the age group as boomers+.

A person on a laptop.

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That’s more than the average of $88,400 saved by the general population. But unfortunately it’s not a lot of money in the context of what could be a 20-year or more retirement.

If you’re looking to retire with more than $120,300 to your name, the good news is that meeting that goal is actually not that difficult. You may even manage to amass $1 million or more by the time your career is over.

You can do a lot better than $120,300

The less savings you bring with you into retirement, the more dependent you may become on Social Security. But with the average retired worker today collecting roughly $23,000 a year in benefits, it’s clear you’ll need savings on top of Social Security to cover your expenses without worry.

Now you don’t necessarily need a $1 million nest egg to retire comfortably. Similarly, just because a single survey shows $1.46 million as the desired savings goal doesn’t mean that’s what you need for your senior years.

But it’s probably a good idea to retire with more than the typical boomer has today. And to that end, you should aim to do two things:

  1. Start saving early
  2. Invest in the broad stock market

The more time you give your savings to grow, the more you can benefit from compounding returns on your investment portfolio. And while you should feel free to pick a stock portfolio if you have the time and knowledge to do so, you can also do quite well for yourself by loading up on a S&P 500 index fund. This allows you to effectively invest in 500 different companies without having to research each one individually.

The results may surprise you

Let’s imagine that you are 27 years old and you have the goal of retiring at the age of 67. This is actually the full retirement age for Social Security purposes for someone your age.

If you save and invest $300 a month over the next 40 years and your portfolio yields an average annual return of 8%, which is just below the stock market average, you could end up with roughly $933,000. Make that $350 a month and that total balance grows to about $1.09 million. And if you are able to save $470 per month, you can reach the $1.46 million goal mentioned above.

Again, that doesn’t mean you HAVE to aim for $1 million or more. Stock market returns are not guaranteed either. But if it’s possible, why not try?

The fact that baby boomers today are looking at $120,300 in retirement savings is a mixed bag. On the one hand, it’s good that many older Americans are approaching their later years SOMETIMES money saved. But it is unfortunate that the average balance is not higher. People in the baby boom generation range in age from approximately 60 to 78 years old. However, if you’re much younger, you have an excellent opportunity to retire with far more money than $120,300 — and enjoy your older years without financial worries.

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