You get to ride off into the sunset with 1 million dollars in the bank. That’s the line that many people have told themselves for years. With that amount of money, they’ll be able to invest in the market and potentially generate 70K a year on the low end. If you’re able to live below your means, you could have a decent retirement. That will especially be the case if you decide to retire somewhere that’s not that expensive. Even reaching that 1 million dollar goal in savings prior to retirement does not guarantee that you’ll be able to live a lavish lifestyle in your later years. What’s perhaps most concerning in this whole ordeal is that according to the Federal Reserve’s latest Survey of Consumer Finances, only about 10% of American retirees have managed to save $1 million or more.
The numbers get even worse; the median retirement savings account balance for all U.S. families, including every age bracket, is currently just $87,000. There’s a bit of a saving grace to the following number. The thing is, Gen X workers, on average, only have about 40K in their savings accounts. They are making up a larger percentage of the workforce as the years go by. Since most of them are entering the workforce, they’re naturally far away from that 1 million.
If we want to continue to talk about terrifying numbers, perhaps the worst of them comes from the Boomers, who, as a generation, have an average retirement savings number of $306,000. That’s way below the 1 million mark, and this is a generation whose youngest members are currently 58. It’s safe to say that the numbers add up! At the same time, that’s not necessarily good news. If the average savings account for the oldest group still containing pre-retirees is $306,000, that means most of the generation won’t get to the million. Are there ways to reverse the stats and get more people to that one-million-dollar mark?
The first thing that could pad the stats but not help at all is inflation. If salaries keep up somewhat with inflation, then the number of people who reach the 1 million threshold in savings could increase. The problem’s going to be that a million dollars in 10 or 15 years won’t get you as much as one million does today. Not to state the obvious, but it would be irresponsible not to; higher earners are more likely to reach the million-dollar goal.
Is it possible for people who are, with all due respect, “middle-of-the-pack” earners or below to reach a healthier retirement? There are two main things that will have to happen for these people. The first thing they have to do is start saving up money early in their careers. Perhaps the second step would be to invest the money in financial options with better returns. That could present a higher risk, but people are already shying away from the typical 401K retirement method regardless. This is due to the lack of options that sometimes are part of these accounts. Meanwhile, millionaire savers still only make up 10% of the population.
