If $1 million was once the consensus target for retirement savings in the U.S., that appears to be changing. A recent Schwab Retirement Plan Services survey found that 401(k) plan participants across the country now believe they must save $1.9 million for retirement. The online survey, handled by Logica Research, conducted 1,000 interviews with plan participants between ages 21 and 70 and gauged confidence levels for achieving their own retirement goals. Whether you’re just beginning to save or quickly approaching retirement age, a financial advisor can help you build a plan.
Retirement Survey Results
In 2019, the same Schwab survey found that 401(k) participants had a target retirement savings of $1.7 million. That goal has since increased and so has investors’ confidence in reaching their goals. More than half (53%) of survey participants said they are likely to achieve their retirement goals, up 16% from a year ago when the COVID-19 pandemic unleashed massive economic turmoil and uncertainty.
“We experienced tremendous stress in our work and home lives this past year that highlighted the importance of financial wellness and the value of trusted advice,” Catherine Golladay, head of Schwab Workplace Financial Services, said in a statement.
But 401(k) plan participants say they still face numerous challenges. In fact, 61% said they needed the type of professional advice a financial advisor can provide, including help calculating a retirement savings goal, investing, creating income in retirement and planning for taxes in retirement.
How to Save $1.9M for Retirement
While the prospect of having $1.9 saved by retirement seems daunting, saving early and often will increase your chances of reaching this goal. Tax-advantaged accounts like 401(k)s and 403(b)s, which are offered through employers, can help you build a nest egg over the years. While annual contributions to these types of plans are capped at $19,500 in 2021 (with a $6,500 catch-up permitted for people 50 and older), those saving for retirement can also contribute $6,000 ($7,000 if you’re over 50) to an individual retirement account (IRA) each year. Those saving for retirement may also want to explore whether a mega backdoor Roth IRA is appropriate for them.
Every three years, the Federal Reserve examines the changes in U.S. family finances, including how much people have saved in retirement accounts at various points in their lives. Using data from the Federal Reserve’s 2019 Survey of Consumer Finances, the Center for Retirement Research at Boston College calculated the median retirement savings across several age groups:
