Did you know that the retirement savings magic number as of 2024 is $1.46 million?
Retirement might seem like it's lightyears away if you are in your 20s or 30s, but time is your greatest ally when it comes to saving for retirement.
Planning for the future, in any aspect, is essential to a happy and stable life where you have full autonomy over your choices and avoid any pitfalls that come with an unstable financial plan.
✅ Covering The Basics
It's hard to save for the future without securing the present. A solid retirement savings plan starts with ensuring you are financially stable on a month-to-month basis.
This involves:
- Crafting a budget aligned with your income and expenses.
- Setting aside funds for emergencies.
- Allocating some of your income towards investing
- Securing essential insurance like health, auto, home, and life.
Once the present you is on solid ground, you can start ensuring that the future you is covered as well — you’ll thank yourself later.
If you’re having trouble managing your finances now, Doing Well is here to help — We offer financial coaching and budgeting with a human-centric approach.
We’ve crafted the How to Budget guide below to get you started on your retirement saving journey regardless of if you're just starting out, or already have substantial savings.
💰Retirement Savings 101
Your retirement savings plan is ultimately comprised of a few different items that all come together to create your overall portfolio and nest egg.
- General cash reserves may be held in high-yield savings accounts and serve as part of an emergency fund or a separate account for future needs during retirement.
- Investment portfolios, such as 401(k)s and IRAs, are crucial for retirement planning, offering tax advantages during employment and serving as a source of withdrawals post-retirement.
- Social Security benefits are a consideration in retirement planning, but it's wise not to rely solely on them due to uncertainties surrounding their future availability.
- Pensions are becoming increasingly rare but can be a valuable asset for retirement planning if available.
With retirement planning shifting more onto individuals, diversifying retirement savings across various assets becomes increasingly essential.
The best thing you can do for your retirement planning is to start early, especially when you're trying to hit that retirement savings magic number.
Your future self will thank you as compounded interest on savings can leave you thousands of dollars ahead when you're consistent and give yourself a head start in your younger years
Look at it this way:
- You're 30 years old and you make $50k yearly — by investing 10% of your income (that’s about $416 a month) for 35 years at an average return of 8%, you’ll have over $897,000 ready for retirement at age 65.
- All things equal, if you started investing the same amount just 5 years earlier at 25, that $897K becomes about $1.35M — an extra $500,000.
Let’s take another figure - Take $500 even and invest it monthly starting at ages 20, 25, and 30 for a planned retirement at 65 years old
- $500 monthly at 20 years old X 8% expected return X 45 years = $2.41 Million
- $500 monthly at 25 years old X 10% expected return X 40 years= $1.62 Million
- $500 monthly at 30 years old X 10% expected return X 35 years = $1.07 Million
💵 Retirement Accounts 101:
✍️The Importance of Diversifying Your Retirement Savings
Diversifying your overall retirement savings is essential - and even though you’ve got a starting point with the traditional investment vehicles listed above, sprinkling in a little extra retirement magic never hurts.
There are different choices in your arsenal including:
- Annuities: Annuities have been gaining some traction lately in this high-yield environment. They allow you to accumulate funds that later translate into regular payouts, offering a buffer against market volatility and a steady income stream.
- Whole Life insurance policies: These include both a death benefit and a cash value, that grows at a guaranteed rate and can be used in case of emergencies or unexpected expenses.
- Bonds: Bonds return the premium at maturity, are often lower risk than stocks, and are often suitable for older investors with a lower risk tolerance.
- Market Investments: Aka — stocks, which are riskier as you can lose your initial investment, but can payout big time if the stock sees significant returns.
- Real Estate: Investing in real estate can provide you with income through rental income or gains by appreciating in value.
Remember while these investment options can add a great deal of diversity to your portfolio, they vary in both risk and rate of return and therefore no one of these should make up your entire portfolio.
Diversifying your retirement portfolio lessens your risk, can lead to greater returns, and ensures your money stays stable until you're ready to use it.
The seeds of financial wellness today bloom into financial security and abundance tomorrow.
By investing in your retirement wisely, and diversifying strategically, saving to retire can allow you to live a stress-free life. Let Doing Well help guide you through your journey to financial success and retirement savings with:
- Personalized budgeting: A step-by-step process that builds you a unique budget plan to fit your lifestyle and financial needs.
- Strategic financial planning: A comprehensive financial analysis that looks at your income, debts, and savings so you can have a solid retirement investment strategy.
- Financial counseling sessions: Human advisor who supports your journey towards retirement by educating you and understanding your aspirations and concerns.
- Expert resources: Conversations and resources on insurance, taxes, estate/legal referrals and retirement ensuring you're covered on all fronts
- Ongoing support: Monthly check-in calls, one-on-one consultations, and async / email support to help adjust your plan, answer your questions, and help you meet milestones.
You can book a free call here.
