Current:Home > NewsThe most important retirement table you'll ever see -ProgressCapital
The most important retirement table you'll ever see
View
Date:2025-04-16 14:08:09
You may have more than one goal for your investments. For most of us, though, there's one overarching investment goal. That's saving enough to fund a nice retirement; at the very least, we'd like to maintain the standard of living we're enjoying during our working years.
A recent survey by insurer and mutual fund company Northwestern Mutual indicates that the average person thinks a $1.46 million nest egg is the magic number. And that figure certainly seems reasonable enough. After all, this amount of money can reliably generate on the order of $60,000 worth of annual income. Paired with whatever retirement benefits you're due from Social Security, that would leave you about as well off as most other people are these days.
Problem? Saving up nearly $1.5 million can be such an intimidatingly big goal that some people may not even bother trying. It's just a lot of money to amass on nothing but an ordinary income -- even if you're investing your savings well.
Maybe saving up for retirement doesn't have to be overwhelmingly daunting. By breaking up your long-term goal into smaller and more manageable pieces, you're not only more likely to achieve it, you're more likely to try reaching it in the first place. That's the first big hurdle to clear.
Here's a closer look at how much you'll ideally have saved up at different ages en route to retirement.
Think in terms of milestones
Maybe $1.46 million is the right number for you. Or, maybe it isn't. As was noted, most people's chief goal in retirement is simply being able to maintain the standard of living they've enjoyed while they were working. You might be able to do so with less than $1.46 million. Perhaps it will require more.
For this reason, rather than focusing on reaching a specific dollar target, let's make the matter more relative. Let's instead lay out your ideal savings target as a multiple of your current wages at a range of ages.
Here's the range of retirement savings -- as a multiple of your current yearly income -- that mutual fund outfit T. Rowe Price suggests you should be sitting on at various stages of your work life while making your way toward a presumed retirement age of 65.
If you're on track with your retirement savings, then congratulations!
Conversely, if you're not quite where you need to be, don't beat yourself up too much. Most people aren't. Most people won't end up catching up, either. Fund company and retirement plan administrator Vanguard reports the average account balance for 65-year-old (and up) participants in its 401(k) plans is only $232,710, while the median balance is a much smaller $70,620. Even those folks earning in excess of $150,000 per year only boast average 401(k) account balances of $340,245, and presumably these accounts represent the biggest chunk of their retirement savings.
That doesn't mean they can't or won't have an enjoyable retirement. Still, one can't help but wonder how many of these investors didn't save all they could when they could have, simply because they didn't have manageable milestone amounts to aim for in the interim.
The retirement savings X factor
But what if it all still seems too far out of reach? That is to say, you fear you're just so far behind where you need to be by now that it feels like you'll never get to where you want to be by then?
Don't be discouraged! There's an important detail you might not fully appreciate about how this works. That is, although there may be no getting around the fact that you're behind on your savings, you don't necessarily have to close the gap with nothing but your work-based wages. There comes a point when the average annual returns on your investments will exceed any amount of money you could realistically add to these accounts from your salary.
The graphic below puts things in perspective. While the start may be slow, presuming you're earning the average annual market return of around 10% on your retirement savings, once you reach the last one-third of your accumulation and growth time frame, things really start to take off.
The bulk of this savings' growth from that point is no longer coming from newly deposited capital. It's coming from gains made on the account's past capital appreciation. That's how even investing just $7,500 per year for 20 years should leave still leave you with a solid stash of nearly $500,000 when all is said and done. That's not bad for just $150,000 worth of contributions of your own money.
Your retirement account's value won't move quite this smoothly in the real world, of course. The stock market is much more volatile than this image suggests, up far more than 10% in some years, and down in others. This image is for illustrative purposes only. Besides, you'll want to pare back your exposure to stocks as your retirement nears.
The graphic's overarching point is still clear, though. That is, doing something is better than doing nothing, and doing it sooner is always better than doing it later. Even something seemingly small now can have a surprisingly big impact down the road.
Whatever you're able to do, you're better off focusing on milestone goals rather than an arbitrarily big future goal. If nothing else, these income-based savings milestones can tell you if you need to be doing something differently before it's too late to matter.
James Brumley has no position in any of the stocks mentioned. The Motley Fool recommends T. Rowe Price Group. The Motley Fool has a disclosure policy.
The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.
What stocks should you add to your retirement portfolio?
Offer from the Motley Fool: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now. The 10 stocks that made the cut could produce monster returns in the coming years, potentially setting you up for a more prosperous retirement.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $740,688!
*Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
See the 10 stocks »
veryGood! (83787)
Related
- What to watch: O Jolie night
- Selena Gomez Reacts to Claim Her Younger Self Would Never Get Engaged to Benny Blanco
- DUIs and integrity concerns: What we know about the deputy who killed Sonya Massey
- Criticism mounts against Venezuela’s Maduro and the electoral council that declared him a victor
- Mega Millions winning numbers for August 6 drawing: Jackpot climbs to $398 million
- Three anti-abortion activists sentenced to probation in 2021 Tennessee clinic blockade
- Canada loses its appeal against a points deduction for drone spying in Olympic women’s soccer
- Boar's Head recall expands to 7 million pounds of deli meat
- US auto safety agency seeks information from Tesla on fatal Cybertruck crash and fire in Texas
- Civil Rights Movement Freedom Riders urge younger activists to get out the vote
Ranking
- Civic engagement nonprofits say democracy needs support in between big elections. Do funders agree?
- Interest rate cut coming soon, but Fed likely won't tell you exactly when this week
- MLB trade deadline live updates: Jack Flaherty to Dodgers, latest news
- Navajo Nation plans to test limit of tribal law preventing transportation of uranium on its land
- Kylie Jenner Shows Off Sweet Notes From Nieces Dream Kardashian & Chicago West
- Megan Thee Stallion set to appear at Kamala Harris Atlanta campaign rally
- Charity Lawson recalls 'damaging' experience on 'DWTS,' 'much worse' than 'Bachelorette'
- RHOC's John Janssen Brutally Shades Ex Shannon Beador While Gushing Over Alexis Bellino Romance
Recommendation
Golf's No. 1 Nelly Korda looking to regain her form – and her spot on the Olympic podium
Double victory for Olympic fencer competing while seven months pregnant
2024 Olympics: Simone Biles Reveals USA Gymnastics’ Real Team Name After NSFW Answer
Matt Damon Details Surreal Experience of Daughter Isabella Heading off to College
Carolinas bracing for second landfall from Tropical Storm Debby: Live updates
Why Olympian Stephen Nedoroscik Doesn't Need His Glasses for Head-Spinning Pommel Horse Routine
South Carolina Supreme Court rules state death penalty including firing squad is legal
Drone video shows freight train derailing in Iowa near Glidden, cars piling up: Watch