Saving for retirement isn’t easy, but as costs continue to rise, it’s more important than ever to have a robust nest egg.
Exactly how much you should save for retirement depends on a variety of factors, such as the cost of living in your area, how much you’ll be receiving in Social Security benefits, and whether you plan to work in retirement. However, the average adult expects to need around $1.8 million to retire comfortably, according to a 2023 survey from Charles Schwab.
If you’re looking to boost your savings with less effort, there’s one simple rule that can help: Don’t just save — invest.
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Investing is far more powerful than saving
Many high-yield savings accounts earn interest rates of around 1% per year, with the highest-yielding accounts offering annual rates of around 4% to 5%. The stock market, on the other hand, has earned an average rate of return of around 10% per year, historically.
While that may not sound like a major difference, it adds up. If you have, say, $200 per month to contribute to your retirement fund, here’s approximately how it would add up, depending on whether you’re earning a 5% or 10% average annual return:
| Number of Years | Total Savings: 5% Average Annual Return | Total Savings: 10% Average Annual Return |
|---|---|---|
| 20 | $79,000 | $137,000 |
| 25 | $115,000 | $236,000 |
| 30 | $159,000 | $395,000 |
| 35 | $217,000 | $650,000 |
| 40 | $290,000 | $1,062,000 |
Data source: Author’s calculations via investor.gov.
Investing can carry more risk in the short term, but over the long haul, you’re far more likely to build a sustainable retirement fund than if you were to contribute to a savings account. So if you’re looking to supercharge your savings, investing is one of the best ways to build a financially secure future.
The $22,924 Social Security bonus most retirees completely overlook
If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $22,924 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after. Simply click here to discover how to learn more about these strategies.
View the “Social Security secrets” »
Charles Schwab is an advertising partner of The Ascent, a Motley Fool company. Katie Brockman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Charles Schwab. The Motley Fool recommends the following options: short June 2024 $65 puts on Charles Schwab. The Motley Fool has a disclosure policy.
