Yahoo Finance How to Put $20 a Day Toward a Million-Dollar Retirement
Saving and planning for retirement has been difficult for many Americans of late due to inflation, soaring interest rates and the resumption of student loans. At this point, reaching $1 million in retirement savings might seem farfetched for many.
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However, some experts say that if you spend $20 on things you don’t need a day (for takeout, coffee on the go, etc.), that small daily amount could be invested elsewhere help you achieve this goal.
As CNBC reported, if you start doing this at age 25, putting the money ($100 a week) into a retirement investment account that generates a 7% annual rate of return, you’d have $1.057 million saved by the time you reach age 65.
While this amounts to $400 a month in savings, breaking it down in smaller, $20 chunks might feel less overwhelming.
“Whenever you have a big goal, you don’t do it by starting and finishing, right?” Anne Lester, a retirement expert and author of “Your Best Financial Life: Save Smart Now for the Future You Want,” told CNBC. “You break it up into small, digestible pieces.”
While looking at your budget and trying to cut on expenses is key, Lester also noted that this doesn’t mean you need to deprive yourself, adding, she is not doesn’t want to “latte shame” anyone.
“If it’s a big, incredibly powerful part of your life then go buy the latte, just budget for it,” Lester told CNBC.
In addition, while saving for retirement early is crucial, it’s also never too late to start — although this may translate into larger contributions as you’ll have less time to compound.
According to Crissi Cole, founder and CEO of Penny Finance, the average monthly retirement savings (by age) to reach $1 million by 65 is as follows:
Age 20: $300 per month;
Age 25: $450 per month;
Age 30: $650 per month;
Age 35: $900 per month;
Age 40: $1,400 per month;
Age 50: $3,200 per month.
For most Americans, the “magic number” needed to retire is currently $1.27 million, according to the Northwestern Mutual’s 2023 Planning & Progress Study — up from $1.25 million reported last year. However, few have that much in savings.
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Indeed, the Northwestern survey found that Americans in their 60s have, on average, $112,500 in retirement savings, while those in their 70s have on average $113,800, with both sums a far cry from the $1.27 million “magic number.” For Americans in their 40s and 50s, the averages are $77,400 and $110,900, respectively. All of which are reasons why you should remember to pocket that $20 today, and invest it in your retirement instead.
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This article originally appeared on GOBankingRates.com: How to Put $20 a Day Toward a Million-Dollar Retirement
