BOSTON (CBS) – Retirement folklore seems to have everyone believing you need $1 million to be able to retire. However, millionaires make up only 5% of the population.
If you are looking for an income of $50,000 in retirement and don’t want to dip into your principal then indeed you’ll need the million. But most people do retire with a lot less than $1 million in savings.
Any savings makes life in retirement better. Most of the time savings do not provide enough income so retirees use principal to supplement their Social Security benefits and pension.
According to a survey about retirement readiness done by Fidelity Investments, close to 60% of the retirees they interviewed wished they had done more to prepare for retirement and earlier.
And the best bet to having $1 million when you retire is to start in your 20s! A 401(k) contribution of $2,000 a year, $40 a week started at age 20 and continued for 47 years with an average 8% return over those 47 years (which is realistic), you could be a millionaire at retirement.
You will have contributed $94,000 to the account over the years.
Most twenty-year-olds do not have retirement planning on their radar screen though. These are the accumulation years. They get that first job and they want stuff. Nice stuff! The flat screen TV, Smart Phone kind of stuff.
Staying out of debt is key to achieving financial success in your 20s. Starting to save for retirement is also a big part of that success. The key years for retirement savings are between the ages of 20 and 35.
The average twenty-something is digging themselves into a black hole of debt they may not get out of for many years. Add all of this accumulation debt to school loans which averaged over $25,000 and you have a formula for disaster.
Great website for help keeping track of your finances and budget is www.mint.com.