Building a large enough nest egg to finance the kind of retirement you're hoping for is a task that takes decades. But one of the tricky parts of that marathon effort is figuring out what the finish line should be -- how much money you should aim to have set aside. Ideally, your goal number would be based on a number of factors such as your end-of-career salary, your desired lifestyle in retirement, and the monthly expenses that will go along with it -- but we can't be sure about some of those things in advance.
The simpler approach is to set a simple numerical savings target and work your way toward it. If that method appeals to you, it might help you to know that on average, Americans believe they'll need $1.7 million to retire, according to Schwab's 2019 401(k) Participant Survey.
That might seem like a massive sum of money, and perhaps an unattainable one. But amassing $1.7 million in your lifetime may be more doable than you'd expect.
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Start early, invest wisely
Building large amounts of wealth for retirement isn't something that only higher earners can do. If you're willing to make some modest sacrifices during your working years, you may be surprised at just how much much you can wind up with.
By "sacrifices," we're really talking about living below your means -- not buying the most expensive house that your mortgage lender will allow, driving more economical cars (and replacing them less often), and splurging less on your vacations. If you build a degree of frugality into your budget so that there's money left over each month to route into your retirement investments, you should be able to amass some serious savings to carry you through your golden years.
There's another catch, though -- you'll need to start investing early on in your career to give your nest egg time to grow. Check out the following table, which illustrates how much you might accumulate by setting aside $500 a month:
| 22 | $1.7 million |
| 27 | $1.2 million |
| 32 | $829,000 |
| 37 | $567,000 |
TABLE AND CALCULATIONS BY AUTHOR.
As you can see, it's possible to amass $1.7 million with a monthly $500 savings contribution over a 45-year period. But if you wait even five years later than that to start saving, you'll fall well short of that goal -- though to be fair, a $1.2 million nest egg is nothing to scoff at. And if you wait until your 30s or 40s to start saving for retirement, you'll need to set aside far more than $500 a month to have a shot at $1.7 million.