How much Young Adults need to save to retire at 65
Americans constantly reevaluate the amount they believe is necessary for a comfortable retirement. According to Northwestern Mutual's 2024 Planning and Progress study, the average retirement goal has surged to approximately $1.46 million, marking a 15% increase from last year's target of $1.27 million and a substantial 53% jump from the $951,000 goal set in 2020.
Furthermore, younger generations have even higher financial aspirations for retirement. The study reveals that Gen Z, aged between 18 and 27, anticipates needing around $1.63 million, while Millennials, aged 28 to 43, project a retirement fund of $1.65 million.
Northwestern Mutual's chief strategy officer, Aditi Javeri Gokhale, highlighted the widening disparity between individuals' retirement goals and their current progress, emphasizing the impact of inflation on retirement savings expectations.
To aid in retirement planning, CNBC computed the monthly savings needed for someone earning $50,000 annually to accumulate $1.46 million by age 65, assuming a starting savings amount of $0 and no consideration for unpredictable life events or market fluctuations.
For instance, if saving starts at:
Draft Prospects Stage - If you start at 21
Earning a 5% annual rate of return: $759 per month
Earning a 7% yearly rate of return: $414 per month
Earning a 9% annual rate of return: $216 per month
Rookie Stage - If you start at 25
Earning a 5% annual rate of return: $957 per month
Earning a 7% yearly rate of return: $556 per month
Earning a 9% annual rate of return: $312 per month
Players Stage - If you start at 30
Earning a 5% annual rate of return: $1,285 per month
Earning a 7% yearly rate of return: $811 per month
Earning a 9% annual rate of return: $496 per month
While having a clear retirement savings target is beneficial, the fluctuating nature of the market can make achieving this goal seem daunting. Focusing on factors within your control, such as your savings rate – the percentage of your income set aside for retirement – is crucial. Fidelity Investments, a primary 401(k) provider, recommends a savings rate of 15%, inclusive of any employer match.