Young Americans are setting lofty retirement goals and are confident they can achieve them.
According to , just over a third of Gen Z and Millennials say they need $1 million or more in savings to retire comfortably. Bankrate September SurveyBankrate defines Gen Z as Americans between the ages of 18 and 26, and Millennials as Americans between the ages of 27 and 42.
While that may seem like a huge number to someone in their 20s or 30s, billionaire status in retirement is becoming more common. According to Fidelity data provided to CNBC Make It, the number of people with more than $1 million in their 401(k) will increase by nearly 30% in the second quarter of 2023 compared to the same period last year. Increased has.
If your goal is to save $1 million or more for retirement, you can achieve your goal if you save diligently. Let’s say you start at age 25. Here’s how much you need to save each month to retire at age 60 and have $1.2 million.
To earn a 5% annual return: $1,056 per month
- Annual income required to save 10% of income: $126,750
- Annual income required to save 15% of income: $84,504
Earn 7% annual return: $666 per month
- Annual income required to save 10% of income: $79,953
- Annual income required to save 15% of income: $53,305
If you’re not sure how much you need to save for retirement, you’re not alone.
Nearly 25% of Millennial and Gen Z workers say they don’t know how much they need to retire comfortably, according to a Bankrate survey. Roughly the same number of Gen Xers feel the same way, and nearly 30% of baby boomers feel the same way.
To figure out how much money you’ll need in retirement, start by using a retirement calculator like the CNBC Make It version. With this tool, you enter information such as your current age, expected retirement age, income, and savings, and it generates an estimate of how much money you’ll need to maintain your lifestyle in retirement.
Whatever their savings goals, most workers are confident that they can save enough to retire comfortably. According to Bankrate, approximately 62% of Millennials and 58% of Gen Z are optimistic about achieving their retirement savings goals.
While it’s important to keep the overall numbers in mind when saving for retirement, you should pay attention to another number: your savings rate.
Your savings rate is the percentage of your pre-tax income that you put into a retirement savings account, such as a 401(k) or Roth IRA. Ideally, you should aim for a 15% retirement savings rate, including an employer match. According to Fidelity.
It’s okay to start with what you can do. If he can only save 7% of his income, start there and aim to increase your contributions by 1% each year until you reach your target savings rate.
“The key here is progress, not perfection,” Margherita Chen, certified financial planner and CEO of Blue Ocean Global Wealth, told CNBC Make It in June. .
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