Americans think they need to save so much for their retirement. But do they really?

If $1 million was once the consensus goal for retirement savings in the United States, that seems to be changing. A recent Schwab Retirement Plan Services survey found that 401(k) plan members across the country now believe they need to save $1.9 million for retirement. The online survey, run by Logica Research, conducted 1,000 interviews with plan participants between the ages of 21 and 70 and measured levels of confidence in reaching their own retirement goals. Whether you’re just starting to save or fast approaching retirement age, a financial advisor can help you build a plan.

Retirement survey results

In 2019, the same Schwab survey found that 401(k) participants had a target retirement savings of $1.7 million. This target has since increased, as has investors’ confidence in achieving their goals. More than half (53%) of survey participants said they were likely to meet their retirement goals, up 16% from a year ago when the COVID-19 pandemic triggered massive economic turbulence and uncertainty.

“We have experienced enormous stress in our work and family lives over the past year, which has highlighted the importance of financial well-being and the value of reliable advice,” said Catherine Golladay, head of Schwab Workplace Financial Services, in a statement.

But 401(k) plan participants say they still face many challenges. In fact, 61% said they need the kind of professional advice a financial advisor can provide, including help with calculating a retirement savings goal, investing, creating retirement income and planning for taxes ahead. retirement.

How to Save $1.9 Million for Retirement

Although the prospect of having $1.9 in retirement savings seems daunting, saving early and often will increase your chances of reaching that goal. Tax-efficient accounts such as 401(k)s and 403(b)s, which are offered by employers, can help you build a nest egg over the years. While annual contributions to these types of plans are capped at $19,500 in 2021 (with a $6,500 catch-up allowed for those age 50 and older), those saving for retirement can also contribute $6,000 ( $7,000 if you are over 50) to an individual pension. account (IRA) each year. Those saving for retirement may also want to know if a Roth IRA mega backdoor is right for them.

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Every three years, the Federal Reserve reviews the evolution of American family finances, including how much people have saved in retirement accounts at various times in their lives. Using data from the Federal Reserve’s 2019 Survey of Consumer Finances, Boston College’s Center for Retirement Research calculated median retirement savings across several age groups:

• Median 401(k)/IRA balance for ages 35-44: $51,000

• Median 401(k)/IRA balance for ages 45-54: $90,000

• Median 401(k)/IRA balance for ages 55-64: $120,000

Here’s how much someone with the median 401(k)/IRA balance at age 35, 45, and 55 would need to save in total each month to reach the $1.9 million threshold at age 65 (these projections assume an annual rate of return 8%):

Create a $1.9 million nest egg 401(k) age/Balanced IRA Monthly savings Retirement savings at age 65

A 35-year-old man who has already saved $51,000 for retirement is clearly in the best position and would need to save $900 a month over the next 30 years to almost hit the $1.9 million threshold. Older workers should save a lot more each month. A 45-year-old man with $90,000 saved needs to save $2,475 a month to eclipse the $1.9 million mark at age 65. Meanwhile, a 55-year-old man with $120,000 saved would need to play some serious catch-up and save nearly $9,000 a month to reach his goal within 10 years.

Conclusion

A million dollars isn’t what it used to be. This was once thought to be a milestone in retirement savings, but 401(k) plan members now think they’ll need nearly twice as much, Schwab survey finds Workplace Financial Services. Building such a large nest egg will likely take time and planning, underscoring the importance of saving for retirement in your 20s and 30s.

Tips for Retirement Savings

• SmartAsset offers a variety of tools that can help you plan for your retirement. Our 401(k) calculator can tell you the value of your account when you retire. In the meantime, our retirement calculator can help you determine if you’re on track to reach your retirement goals.

• Need help managing your investments? How about planning your retirement income? A financial advisor can help you with a myriad of financial needs and finding one in your area doesn’t have to be difficult. Finding a qualified financial advisor doesn’t have to be difficult. SmartAsset’s free tool connects you with up to three financial advisors who serve your area, and you can interview your matching advisors for free to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, start now.

• Don’t forget to contribute to your 401(k) up to your company’s 401(k) match, if one is available. Otherwise, like a third of Americans, you are leaving free money on the table.

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