As Americans grapple with the daunting task of saving nearly $1.5 million as a nest egg for retirement, financial experts recommend a gradual approach to increasing savings contributions. By making incremental changes to their savings rate, individuals can significantly improve their retirement outlook over the long term.
A recent study from Northwestern Mutual revealed that Americans believe they need to save a staggering $1.46 million to guarantee a comfortable life in retirement — an all-time high statistic, as it represents a shocking 53% increase since 2020, when the “magic number” for retirement savings was just $951,000.
Vanguard’s recent retirement research suggests that workers should aim to save 12% to 15% of their income annually and invest in an age-appropriate asset mix. This strategy can help improve their sustainable investment rate, which is the highest level of pre-retirement income they can replace.
“I would much rather have clients that save 15% of their income and get a 5% rate of return than save 1% of their income and get a 15% rate of return,” said John Roland, a certified financial planner and private wealth advisor at Northwestern Mutual’s Beyond Financial Advisors.
For those who find it challenging to immediately increase their retirement savings deferral rate to 15%, experts suggest boosting contributions by 1% per year. These incremental increases can make a significant difference in the long run, helping individuals build a more substantial retirement nest egg without feeling overwhelmed by the process.
