Americans believe they need to save that much to retire. But do they really?

A couple looks at their retirement savings. A recent poll found that Americans believe retirement will require them to save $1.9 million.

If $1 million was once the consensus goal for retirement savings in the US, that appears to be changing. A recent survey by Schwab Retirement Plan Services found that 401(k) plan participants across the country now estimate they need to save $1.9 million for retirement. Conducted by Logica Research, the online survey conducted 1,000 interviews with plan participants between the ages of 21 and 70 and measured their confidence in achieving their own retirement goals. Whether you're just starting out or fast approaching retirement age, a financial advisor can help you create 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. Since then, this target has increased and with it the confidence of investors in the achievement of their targets. More than half (53%) of survey respondents said they are likely to achieve their retirement goals. That's up 16% from a year ago, when the COVID-19 pandemic triggered massive economic turmoil and uncertainty.

“We have experienced tremendous stress in our work and personal lives over the past year that has highlighted the importance of financial health and the value of trustworthy advice,” Catherine Golladay, head of Schwab Workplace Financial Services, said in a statement.

However, participants in the 401(k) plan say they still face numerous 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 income in retirement, and planning for retirement taxes.

How to save $1.9 million for retirement

A recent study found that 401(k) participants believe they need to save $1.9 million for retirement.

A recent study found that 401(k) participants believe they need to save $1.9 million for retirement.

While the prospect of having $1.9 saved by retirement seems daunting, saving early and often increases your chances of achieving that goal. Tax-deferred accounts like 401(k)s and 403(b)s offered by employers can help you build a nest egg over the years. While annual contributions for these types of plans are capped at $19,500 in 2021 (with a $6,500 catch-up allowance allowed for those age 50 and older), those saving for retirement can also make $6,000. dollars ($7,000 if you are over 50 years old) into an individual retirement savings account (IRA) each year. Those saving for retirement may also want to see if a Roth mega backdoor IRA is right for them.

If you are ready to be matched with local advisors who can help you achieve your financial goals, get started now.

Every three years, the Federal Reserve examines changes in US family finances, including how much people have saved in retirement accounts at different points in their lives. Using data from the Federal Reserve's 2019 Consumer Finance Survey, the Center for Retirement Research at Boston College calculated average retirement savings for several age groups:

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

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

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

Here's how much someone with the average 401(k)/IRA balance aged 35, 45, and 55 would need to save each month combined to reach the $1.9 million mark by age 65 achieve (these forecasts assume an annual return of 8%) :

Build a $1.9 million nest egg Age 401(k)/IRA balance Monthly savings Retirement savings at age 65 35 $51,000 $900 $1,899,046 $45 90,000 $2,475 $1,901,238 $55 120,000 $8,930$1,900,065

A 35-year-old who has already saved $51,000 for retirement is clearly in the best position and would need to save $900 a month for the next 30 years to get close to the $1.9 million threshold to reach. Older workers would have to save a lot more each month. A 45-year-old with $90,000 in savings would need to save $2,475 a month to break the $1.9 million mark by age 65. A 55-year-old with $120,000 in savings, on the other hand, would have to seriously catch up and save nearly $9,000 a month to hit their goal within 10 years.

bottom line

A recent study found that participants in the 401(k) plan estimate they need $1.9 million in retirement savings.

A recent study found that participants in the 401(k) plan estimate they need $1.9 million in retirement savings.

A million dollars isn't what it used to be. This used to be considered a milestone for retirement planning, but 401(k) plan participants believe they will need almost twice as much, according to a survey by Schwab Workplace Financial Services. Building such a large nest egg likely takes time and planning, which underscores the importance of saving for retirement in your 20s and 30s.

Retirement tips

  • SmartAsset has a variety of tools to help you plan for retirement. Our 401(k) calculator can show you how much your account will be worth by the time 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 variety of money 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 puts you in touch with up to three financial advisors based in your area, and you can interview the right 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, get started now.

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

Photo credits: ©iStock.com/izusek, ©iStock.com/iChainarong Prasertthai, ©iStock.com/Piotrekswat

The post 401(k) Plan Participants Say They Need to Save So Much to Retire appeared first on the SmartAsset blog.

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