On average, you’re going to need $1.9 million in savings to retire comfortably in the United States, according to a survey conducted by Charles Schwab last year. Building a nest egg of that size can be a daunting task, but it is achievable, especially if you start early and follow a plan.
Obviously, the less time you have until retirement, the more you need to save each month to make it to $1.9 million. And, there are other variables at play, such as what you choose to invest in and how much risk you’re willing to take.
It should be noted that building a $2 million nest egg doesn’t mean you have to save up $2 million over the course of your working life; the actual amount you need to save will be considerably less than this, as investing in assets which deliver consistent yet strong annual returns will almost certainly help your savings grow quickly over time.
How To Retire With $2 Million in Savings
Here are some helpful tips to help you retire with $2 million in savings and enjoy a comfortable retirement:
Take Advantage of Employer Matched Contributions
Some employers offer schemes to match your 401(k) contributions, which can effectively double the amount of money you’re able to save towards retirement each month. If your employer offers this, it’s practically a no-brainer to opt-in as it is one of the most effective and easiest ways to save more money for retirement.
Cut Discretionary Spending
Cutting non-essential spending leaves you with more money to save each month. This, coupled with the growth you can achieve by investing these extra savings and compounding their returns, can have a very big impact on how much you’re able to save in the long run.
Some types of discretionary spending are easier to cut out than others, but things like using less electricity, eating out less often and shopping around for cheaper alternatives can all help you reduce your monthly outgoings.
Sell Non-Income Generating Assets
Selling off non-income generating assets, such as a car or an expensive piece of jewellery, and investing the proceeds can be a good way to build a larger nest egg.
However, you should consider whether selling a particular asset may result in you having to spend more money elsewhere (for example, if you sell your car, will the cost of taxis or public transport be greater than the cost of fuel and insurance?)
Working additional hours allows you to increase your earnings and save up more money, though many people will be put off the idea of working overtime, especially in the long run. But, if you are yet to start building a nest egg and don’t have a lot of time left until you retire, it’s definitely worth considering.
A Quick Summary
- You need to build up $1.9 million of savings to retire comfortably, according to a 2020 survey conducted by Charles Schwab.
- The less time you have until retirement, the more you need to save each month to hit this objective.
- Selling non-income generating assets, like your car, and investing the money can help you build a larger nest egg.
- Working overtime and cutting discretionary spending can also help you save more each month – and this can add up to a considerable amount of money over the course of your working life.