Many young Americans hope to retire as millionaires — and they're pretty optimistic about reaching that goal.
Most Americans believe they'll need to save over $1 million by the time they retire and that amount varies slightly by age group. Those in their 20s think they'll need around $1.2 million saved for retirement while those in their 30s and 40s say they'll need about $1.44 million and $1.28 million, respectively, per Northwestern Mutual's 2023 "Planning and Progress Study."
Those may seem like lofty goals, however a little over half of respondents feel they'll be financially prepared for retirement when the time comes, per Northwestern Mutual's study which conducted 2,740 online interviews of adults in the U.S. over the age of 18.
It's important to note that the amount you'll need to save for retirement will depend on a variety of factors that are unique to you such as where you plan to live, whether you plan to continue working part time and what kinds of health care expenses you'll need to cover.
But say you wanted to set a very ambitious retirement goal. CNBC calculated how much you'd need to put away each month if you wanted to retire with $5 million by age 67. These calculations are based on starting to save at ages 21, 25 and 30 with a beginning balance of $0. They don't factor in unpredictable life events such as market volatility, promotions or layoffs.
And since retirement experts generally say you should save around 15% of your income for retirement, CNBC also calculated what you'd need to earn annually in order to amass $5 million without exceeding that 15% savings rate.
If you start at 21
Earning a 5% annual rate of return: $2,324 per month
- Annual salary needed if you save 10% of your income: $278,899
- Annual salary needed if you save 15% of your income: $185,942
Earning a 7% annual rate of return: $1,226 per month
- Annual salary needed if you save 10% of your income: $147,089
- Annual salary needed if you save 15% of your income: $98,064
Earning a 9% annual rate of return: $616 per month
- Annual salary needed if you save 10% of your income: $73,964
- Annual salary needed if you save 15% of your income: $49,312
If you start at 25
Earning a 5% annual rate of return: $2,922 per month
- Annual salary needed if you save 10% of your income: $350,601
- Annual salary needed if you save 15% of your income: $233,745
Earning a 7% annual rate of return: $1,643 per month
- Annual salary needed if you save 10% of your income: $197,128
- Annual salary needed if you save 15% of your income: $131,425
Earning a 9% annual rate of return: $889 per month
- Annual salary needed if you save 10% of your income: $106,629
- Annual salary needed if you save 15% of your income: $71,090
If you start at 30
Earning a 5% annual rate of return: $3,905 per month
- Annual salary needed if you save 10% of your income: $468,566
- Annual salary needed if you save 15% of your income: $312,393
Earning a 7% annual rate of return: $2,385 per month
- Annual salary needed if you save 10% of your income: $286,185
- Annual salary needed if you save 15% of your income: $190,800
Earning a 9% annual rate of return: $1,410 per month
- Annual salary needed if you save 10% of your income: $169,215
- Annual salary needed if you save 15% of your income: $112,816
Although you may not want to retire as a millionaire, it's helpful to have an idea of how much you may need to save in order to cover your living expenses after you stop working full time. CNBC Make It's retirement calculator can help you figure that out based on factors including your current age, income and savings.
And don't panic if you can't make these retirement contribution amounts just yet. It's OK to start with what you can and increase your contributions over time. One way to do this is to increase your contributions by 1% each year until you reach the recommended 15% savings rate.
But it's important to get started early. By beginning sooner rather than later, you can take advantage of the power of compound interest which helps your money grow exponentially.
"Investing at a young age not only allows your money the opportunity to grow to a level that will have a major financial impact on your future, but also presents an opportunity to learn about investing, try new things, and ultimately set yourself up for a successful financial future," says Joanna Rotenberg, president of Personal Investing, in Fidelity's "Q2 2023 Retirement Analysis."
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CHECK OUT: How much money you'd need to save each month to retire with $1.5 million if you earn $80,000 a year
FAQs
Accumulating a $5 million nest will require saving each month somewhere between a few thousand dollars and a few tens of thousands of dollars, with the difference depending mostly on your age when you start. Other factors include your age at retirement, investment returns and taxes.
How much to save to retire with $5 million? ›
Accumulating a $5 million nest will require saving each month somewhere between a few thousand dollars and a few tens of thousands of dollars, with the difference depending mostly on your age when you start. Other factors include your age at retirement, investment returns and taxes.
How many Americans have $5 million in savings? ›
According to EBRI estimates based on the latest Federal Reserve Survey of Consumer Finances, 3.2% of retirees have over $1 million in their retirement accounts, while just 0.1% have $5 million or more.
What is the annual return on $5 million dollars? ›
For example, you might assume an average 8% annual return on your investments. This is a middle-of-the-road return for a diversified portfolio of stocks, bonds and cash. At this rate of return, $5 million will generate $400,000 in the first year. For a spending figure, you can use 4% of the total you have saved up.
How much will $1 million provide in retirement? ›
A $1 million retirement account gives you around $40,000 per year for the first few years of your retirement. Once Social Security kicks in, this will give you on average anywhere from $65,000 to $95,000 per year depending on your lifetime earnings and when you began collecting benefits.
What does a $5 million dollar retirement look like in America? ›
Even if you live another 50 years, $5 million in savings would allow you to live on $100,000 per year. Here are four things to keep in mind as you plan for a $5 million retirement at age 55. A financial advisor can help you manage your assets and plan for retirement. Find an advisor today.
Can you live comfortably with $5 million dollars? ›
Yes, you can retire comfortably and happily with this amount to fund your non-working lifestyle.
What percentage of Americans have a net worth of $5 million? ›
“Somewhere around 4,473,836 households have $4 million or more in wealth, while around 3,592,054 have at least $5 million. Respectively, that is 3.48% and 2.79% of all households in America.”
What does the average American retire with? ›
Key findings. In 2022, the average (median) retirement savings for American households was $87,000. Median retirement savings for Americans younger than 35 was $18,800 as of 2022.
What is considered wealthy in retirement? ›
Even $800,000 in retirement savings doesn't necessarily mean you're wealthy — it just means you'll have enough to retire comfortably for 25 to 30 years. According to some surveys, you need at least $2 million in net worth to be considered wealthy.
The good news is even if you don't invest your money and generate returns, $5 million is still enough that you could live on $100,000 a year for 50 years. That'll last you until the age of 95, far beyond the average lifespan.
Is $5 million dollars considered wealthy? ›
This sum of money would quickly put you in the top 1% of the U.S., according to Fortune magazine. When you consider how wealthy the U.S. is relative to most of the world—for instance, $57,000 of net worth would put you in the top 1% in the Philippines—$5 million is an enormous number.
Can you deposit $5 million into a bank? ›
You can generally deposit as much as you want at a bank or other financial institution, but some banks may have extra rules and restrictions due to federal law and bank policy. For example, ATMs can limit the amount of bills you can deposit.
What is the average 401k balance for a 65 year old? ›
What percentage of retirees have $4 million dollars? ›
According to a 2020 working paper from the Center for Retirement Research at Boston College, the top 1% of retirees-which a retiree with $4 million in assets would fall into-can expect to pay about 22.7% in state and federal taxes.
Can I live off interest on a million dollars? ›
Once you have $1 million in assets, you can look seriously at living entirely off the returns of a portfolio. After all, the S&P 500 alone averages 10% returns per year. Setting aside taxes and down-year investment portfolio management, a $1 million index fund could provide $100,000 annually.
Is retiring with $5 million good? ›
Assuming a conservative yearly interest rate of 4%, a $5 million portfolio could generate $200,000 in interest income annually. For most retirees, the six-figure income is enough to live comfortably and travel in their golden years — without touching their $5 million savings.
Can you retire at 30 with $5 million dollars? ›
If you have $5 million in the bank, you can most likely afford a comfortable retirement at age 30, but be careful. This is a lot of money, but it won't keep you indefinitely wealthy and your life will change a lot in the coming years.
Can I retire at $50 with $4 million? ›
Retiring at 50 is an excellent opportunity to enjoy the years ahead without worrying about work and $4 million is a reasonable amount to make it possible. The initial nine and a half years may be difficult since federal penalties bar access to your retirement account.
Is $6 million enough to retire at 55? ›
Yes, $6 million is more than enough to retire at age 55, especially with smart money management and budgeting. Just make sure you are aware that this will involve sacrificing a lot of potential gains in your portfolio overall.
