Many Americans worry they’re not saving enough for retirement, and rightfully so. A 2022 Northwestern Mutual study found that 62% of U.S. adults admit their financial planning needs improvement. However, only 35% of Americans work with a financial advisor. While the value of working with a financial advisor varies by person and advisors are legally prohibited from promising returns, research suggests people who work with a financial advisor:
Feel more at ease about their finances and
Could end up with about 15% more money to spend in retirement.
A 2019 Vanguard study found that, on average, a hypothetical $500K investment would grow to over $3.4 million under the care of an advisor over 25 years, whereas the expected value from self-management would be $1.69 million, or 50% less. In other words, an advisor-managed portfolio would average 8% annualized growth over a 25-year period, compared to 5% from a self-managed portfolio.
Have I saved enough? The National Institute of Retirement Security reports: Approximately 40 million households have no retirement savings.4 It’s never too late to get started. Although results are never guaranteed and risks are involved, well-managed investments may potentially compound over time. Fidelity reported in May 2022 that the average 401(k) balance for those who've been saving for over 10 years averaged over $380,000.5
So how much do I need to save?
Here are some general retirement guidelines to consider:
You should have saved the equivalent of one year’s salary by the time you hit 30, according to Fidelity research, but saving more certainly won’t hurt.
Going by their estimates, you should aim to have:
Retirement by age
3x by 40
6x by 50
8x by 60
10x by retirement
These recommendations are based on a person saving 15% of their income beginning at age 25, investing at least 50% in stocks and a target retirement age of 67.6 Of course, saving for retirement is different for everyone. If you feel like you're behind in savings, want to make sure you're on track, or want to find investment vehicles to help you save more, talking to an advisor can help you set and execute a retirement plan. Each advisor has a differentiated strategy. It’s important to find one with experience in your strategy and preferences.
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