Key Points
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Savers under 35 have a median retirement account balance of $18,880.
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You can estimate your savings goal by multiplying your estimated annual retirement expenses by 25.
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Consistent retirement contributions are key to reaching your savings target.
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By the time you’re 35, you’re no longer a newcomer to the workforce. Yet, low average salaries, student debt, and saving for near-term goals keep median retirement savings relatively low for this group. The typical worker under age 35 only has $18,880 set aside for the future, according to The Motley Fool’s research on average retirement savings.
If you’ve saved more than this, you’re doing better than a lot of people your age. But there’s a difference between being ahead of the pack and being on track for retirement.
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How to know how much you need to save for retirement
Your retirement savings goal will depend on your lifestyle and life expectancy. One popular rule of thumb is to take the amount you expect to spend in your first year of retirement and multiply it by 25. For example, if you expect to spend $50,000 of your own money in your first year of retirement, your savings target would be $1.25 million.
You don’t have to save all of that on your own. Investment earnings will cover a lot, especially if you save consistently from a young age and avoid tapping your retirement accounts early.
If you have the average $18,880 invested today and earn an 8% average annual return over the next 30 years, that amount will be worth nearly $190,000, and that’s without you adding another penny to your savings. You’ll likely need more than that to retire comfortably, though.
Rather than using the amount other people your age have saved as a benchmark, figure out how much you need to save to reach your goal. An online investment calculator can help you with this. Then, do your best to save as much as it recommends each month.
What to do if you’re not able to save as much as you’d like
Many people find themselves unable to save as much as they’d like for retirement due to high living costs, but that doesn’t mean you’re out of luck. You may be able to adjust your budget by reducing spending in some areas to free up more cash for retirement savings.
If you qualify for a 401(k) match from your employer, prioritize claiming it each year. This is essentially a bonus that you only get if you set aside money for retirement, and it could help you reach your savings target much more quickly.
When those moves aren’t enough, you may have to rethink your existing retirement plan. Delaying retirement for a short time can help you accumulate more savings while also reducing the length and cost of your retirement.
You don’t have to decide when you can afford to retire right now. Just save as much as you’re able to each month, and check in with yourself at least annually on your progress.
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