96% of Americans Have Less Than $1 Million Saved for Retirement: How To Avoid Falling Short of the Standard Nest Egg

Back view of embraced mature couple looking at view while relaxing on a jetty at river.
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GOBankingRates recently conducted a survey of 1,001 adult investors, and the results are somewhat startling, particularly regarding how much they have saved for retirement. According to the survey, 96% of respondents have less than $1 million saved for retirement, and more than half have less than $20,000 saved.

Since many Americans have $1 million in mind when they think about a retirement savings goal, it’s clear that there’s some work left to be done. If you think you’re in the same camp as many Americans — likely to fall short of a $1 million retirement nest egg — here are some steps you can take to improve your chances of reaching that popular goal.

Calculate How Much You Will Really Need

While $1 million is a nice round number and considered to be the standard, ideal figure for most retirees, the truth is that for many Americans, it’s far more than they will require to enjoy a happy retirement. This is particularly true if you live in a low-cost state or country.

Rather than reading news stories about how you “need” $1 million to successfully retire, sit down and do the math yourself. For example, if you’re living happily right now on $50,000 per year, why do you think you’ll need $1 million to retire? Even without investing your savings, your nest egg will last 20 years, and if you invest it, that sum will likely last for more than 30 years.

Are You Retirement Ready?

Also, don’t forget to factor in additional sources of income you might have in retirement. Social Security is likely the largest of these. At the average monthly payout of $1,657 for 2022, you’ll earn an additional $19,884 annually on top of your retirement nest egg, and if you earn the maximum payout, that amount will jump to $50,328.

This is on top of any pension income you might be owed, or any income you may generate from a side gig. The bottom line is that $1 million is just an arbitrary number. Do the math and calculate your own personal expenses and income and come up with the number you will really need.

Save Early and Often

The best “trick” to reaching $1 million in savings by the time you retire is also one that is rarely used — saving early and consistently. If you can start saving just $375 per month at age 20, for example, you’ll break the $1 million barrier by age 65 even if you only earn a fairly modest 6% annual return. While that $375 per month might seem like a lot at age 20, as you get older, you’ll likely be able to add much more to it, to the point where you might be saving more than $1,000 per month in your 30s or 40s.

Under this relatively painless scenario, you could easily end up with well over $1 million in your accounts by the time you retire. But if you wait to invest until you are 40, those numbers go up dramatically. All other things being equal, you’d have to invest closer to $1,500 per month to reach $1 million — not $375 per month — if you wait until age 40. So, the early bird gets the easier path to the ideal retirement savings amount.

Are You Retirement Ready?

Invest Aggressively, but Not Foolishly

As noted above, it actually doesn’t take too much work to reach $1 million in savings if you start early enough. But the truth is that most Americans don’t start regularly saving and investing at age 20. Even for those who do, expenses later in life — from emergencies to having children to living too extravagantly — can temporarily pause or reduce contributions.

As a result, it’s important that you invest your long-term retirement savings fairly aggressively. However, it’s equally important to note that “fairly aggressively” is not a synonym for “speculatively.” In other words, putting all of your investments into cryptocurrency in the hope that it will explode higher in price is not a prudent strategy. But putting a high percentage of your savings in high-quality stocks with long-term track records of profitability and high dividend payouts is. 

The Bottom Line

It doesn’t require being rich, or even exceptional investment success, to reach $1 million in savings by the time you retire. And truthfully, many Americans won’t even need that much to enjoy a successful retirement. But whatever your retirement savings goal is, reaching it does take dedication. Start early, invest consistently, and choose solid long-term investments and you may find yourself in a financial position envied by the majority of Americans.

More From GOBankingRates

Are You Retirement Ready?

Methodology: GOBankingRates surveyed 1,001 Americans aged 18 and older from across the country between May 24 and May 25, 2022, asking ten different questions: (1) Have you ever followed money advice from a well-known expert?; (2) When do you believe you will be able to retire?; (3) What account(s) are you currently utilizing for your retirement? (Select all that apply); (4) Do you plan on funding your retirement with Social Security?; (5) How much monthly Social Security income do you believe you will receive when you are retired?; (6) Given the recent performance of overall Stock Market indicators (S&P 500, Dow Jones Industrial average, etc.) how are you currently adjusting your investing behavior?; (7) What items do you purchase most frequently at Walmart?; and (8) What items do you purchase most frequently at Costco? GOBankingRates used PureSpectrum’s survey platform to conduct the poll.


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