Retirement: the magical time when you no longer have to work for your money. Instead, after years of hard work and smart financial decisions, your money should work for you. The age you started saving and investing — as well as how long you were in the workforce — all make a difference when it comes to retirement savings.
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According to 2022 Federal Reserve Survey of Consumer Finances (SCF) data, the average retirement savings for those under age 35 is $49,130, while the same figure for those aged 55 to 64 is $537,560.
Being wealthy in 2024 requires a heck of a lot of money when you consider the rising cost of nearly all of our everyday expenses, thanks to stubborn inflation.
These average retirement savings might seem like significant figures, but is it enough to be considered “rich” given the cost of living? It depends on which generation you’re asking.
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Gen Z and Boomers Think You Need Many Millions To Retire ‘Rich’
GOBankingRates surveyed 999 Americans aged 18 and older from across the country between July 23 and July 29, 2024. One question that was posed was “How much savings do you feel a couple needs to retire rich?” The results were interesting.
The survey found that more than 24.49% of Gen Z (age 18 to 24) and more than 27.27% of younger baby boomers (age 55 to 64) say couples need more than $5 million in retirement savings to retire “rich.”
Gen Z and boomers may exhibit many ideological and generational differences. But, interestingly enough, there seems to be a close consensus between one of the youngest generations — members of which are now entering the professional workforce — and the older generation, who’s getting ready to retire… and how they view a “rich” retirement.
Retirement planning might seem overwhelming and a bit scary. You might be thinking that it’s impossible to accumulate a combined $5 million in retirement savings by the time you retire, or that you simply won’t have enough to make ends meet later in life. However, with the proper financial planning, persistence, and work ethic, you can become a multi-millionaire in retirement, too.
Here are some tips and tricks to retire rich, according to Fidelity Investments and Charles Schwab. Of course, figures may have to be doubled for couples looking to retire rich.
Retirement Savings By Age
Here’s how much you’ll want to have saved for retirement by age, to ensure financial security:
- Age 30: at least 1x your salary.
- Age 35: at least 2x your salary.
- Age 40: at least 3x your salary.
- Age 45: at least 4x your salary.
- Age 50: at least 6x your salary.
- Age 55: at least 7x your salary.
- Age 60: at least 8x your salary.
- Age 67: at least 10x your salary.
Save at Least 10% to 15% of Your Income for Retirement
Putting away at least 10 to 15% of your gross income for retirement every year is a smart move to ensure ample retirement savings during your golden years. This includes any employer matching plus your retirement contributions. However, this rule only applies if you start saving in your mid-20s to early 30s. If you wait to start saving until later in life, you’ll need to save a substantially higher percentage of your income in order to retire on time.
Have 25x Your Planned Annual Spending Saved by the Time You Retire
Be sure that you have at least 25x your planned annual spending put away by the time you call it quits at work. This rule should be applied to how much money you think you’ll need just from your portfolio in the first year of retirement. It can be tricky to determine precisely how much you’ll be spending each year, so it’s wise to consult with a financial advisor to map out an appropriate financial plan.
Follow the “4% Rule”
The so-called “4% rule” is frequently misunderstood. Many people believe that you should seek a 4% annualized yield from stocks and bonds and live off the dividends. Others believe that you should withdraw only 4% of your portfolio every year if you want it to last for the rest of your life.
However, what this important rule means is that you’ll need to add up all your investments during your first year of retirement and withdraw 4% of that total. For each subsequent year, you’d adjust the dollar amount you withdraw to adjust for current inflation levels. Following this rule will result in a high probability of not outliving your money based on a 30-year retirement.
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This article originally appeared on GOBankingRates.com: This Is How Much Savings Couples Need To Retire ‘Rich,’ According to Both Gen Z and Boomers
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