How the average Gen Xer can save $1.5 million for retirement

Americans are worried about not having enough money for retirement. A recent survey by Northwestern Mutual found that Americans believe they need an average of $1.46 million to live comfortably in retirement. That dream “nest egg” number is up 15% from last year due to high inflation.

The most important factor affecting retirement savings is time. If you have plenty of time ahead to work, save, invest, and grow your money, you’re more likely to be able to save up a decent amount for retirement. Don’t feel bad if you don’t save enough. Many Americans who are still in their prime can still make big strides.

Let’s take a look at retirement savings options for Gen X and what it takes to save $1.5 million for retirement.

Gen X Retirement Savings: $108K saved, 15 years left.

According to Northwestern Mutual’s 2024 Planning and Progress Study, Gen However, this generation is the most pessimistic about retirement prospects. Just 48% of Gen

Is it true that Generation X is so pessimistic? Let’s break down the numbers by making some assumptions.

• Generation X is generally identified as those born between 1965 and 1980. So the “typical” Generation X was born right in the middle, in 1972. 52 years old today.
• And let’s say this 52-year-old has the average retirement savings of Gen X from a Northwestern Mutual survey. $108,600.
• The full Social Security retirement age for this Generation X is 67. Save and invest for 15 more years for retirement.

Let’s take a look at how Generation X can make the next 15 years count.

How to Invest for Retirement: 15 Years Ahead

15 years is not a long time. Even if you have $108,600 saved, you’ll need to be actively saving and investing to retire at age 67.

Let’s look at some examples, depending on how much you save per month.

If you save $500 a month

Let’s say you start with $108,600 saved for retirement and can add a total of $500 each month ($6,000 per year). This includes your 401(k) (if you have one) and other long-term retirement plans. An account such as a Roth or Traditional IRA.

Let’s say you invest that money aggressively in a diversified portfolio of primarily stocks and ETFs to achieve an average annual return of 8%. And let’s say your retirement savings contributions increase by 2% each year as your salary increases at work.

15 years later Saved $541,738 for retirement. A 4% annual withdrawal (general recommendation) is enough to make a profit. Retirement Income $21,670 yearly. That’s a lot better than nothing, but it falls well short of the $1.5 million goal that most Americans set for their ideal retirement savings. Let’s try again with a larger number.

If you save $1000 a month

Let’s say you can save $1,000 per month ($12,000 per year). Assuming your retirement savings grow by 2% each year and your average annual return remains the same at 8%, after 15 years you would get: Saved $738,979 for retirement. That nest egg is created around $29,559 per year Retirement Income (assuming 4% annual withdrawals)

Again, not bad! It’s getting better. Most people can actually live off that income in retirement. Especially when the average Social Security retirement check is $1,907 per month. But what if you want to live more comfortably after retirement? There is still time to save.

If you save $1,500 a month

Again, assuming you start with $108,600 saved (at age 52), increase your savings by 2% per year, and assume an average return of 8% over 15 years, saving $1,500 per month ($18,000 per year) would result in: If you’re 67, that’s probably true. Invest $936,219 for retirement. That’s enough to let you know $37,449 Annual retirement income.

We’re getting closer and closer to the “magic number” of $1.5 million. Want to know what you need?

If you save $3000 a month

If you can afford to save more aggressively for retirement, it may still be possible for a 52-year-old to reach his retirement goal of $1.5 million. Let’s say you already have $108,600, increase your savings contribution by 2% each year, and save and invest for the next 15 years at an average annual return of 8%.

If you save $3,000 per month ($36,000 per year) by age 67, Saved $1,527,940 for retirement. That nest egg is created around $61,118 per year of retirement income.

conclusion

Generation X doesn’t have to feel depressed about retirement. If you have the average retirement savings for your age group ($108,600), you still have time to save a significant amount of money to support your golden years.

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