Key Points
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The average retirement savings is $339,940.
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Americans think they will need $1.26 million to retire.
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While the average retirement savings probably won’t provide enough income for most people to retire, you should look at your own personal financial details.
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Americans think they will need $1.26 million to retire comfortably, according to Northwestern Mutual’s 2025 Planning & Progress study. However, a good number of Americans are going to fall far short of that. In fact, the typical retirement savings amount for households in the U.S. is nowhere near $1 million, and the majority of current retirees also do not have seven-figure nest eggs.
It’s important to understand that while there are optimum goals to set for retirement, your own individual financial situation is ultimately going to determine how much money you need to be stable in your senior years. Here’s what you need to know about the state of Americans’ retirement savings, as well as some advice on determining how much you personally will need to retire.
Americans have less saved for retirement than you might think
While Americans may aspire to retire with $1.26 million,
A nest egg with $339,940 in it would result in an annual income of around $13,597.60, assuming you follow the 4% rule, while a nest egg of $609,340 would result in $24,373.60 in annual income. By itself, it would be a struggle to live on this amount of money. When combined with Social Security, however, some seniors could make it happen — although it would provide far from a lavish lifestyle.
Of course, there are also averages. Higher earners with big 401(k) balances may bring this number up, and a 2024 survey conducted by GoBankingRates found that around 28% people have no savings for retirement, so those with $0 balances can obviously bring down these numbers substantially. Still, this isn’t a lot of money for the typical family to make retirement work, especially given the record-high inflation occurring in the post-COVID era.
How much do you need saved for retirement?
So, can you retire if you have the average amount of savings, or close to it? A lot depends on what your income needs are. As a general rule of thumb, you need to replace around 80% or so of your pre-retirement income when you leave the workforce… although some people say 70% is a reasonable target, while those who want to travel a lot or who have expensive healthcare needs may need closer to 90% or even 100%.
Social Security is only designed to replace around 40% of pre-retirement funds, which is not going to be enough for pretty much anyone because taking a 60% cut to pay is unsustainable. Plus, Social Security retirement benefits alone would barely place you above the poverty level. So, you’ll ideally want to aim to have savings that replace a minimum of 30% of what you were earning before leaving work.
You also need to make sure you are not draining your savings account too quickly, so your investments should be large enough that you can stick to the 4% rule and withdraw no more than 4% of the account balance in year one, then adjust upward for inflation. Following this rule gives you around a 90% chance of making your money last through the entirety of your retirement.
Before retiring, you should ideally make a budget to see what income you need, then determine if your investments can produce it. If not, you’ll need to either make plans to work longer and save more or will have to scale down your living standard. A financial advisor can help you with this process and help to ensure you have the funds you need for a secure future.
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