To retire with a nest egg of $2,000,000 you basically have to save, save, save. Here's a breakdown of how much you have to put away in your 401(k) each month.
Financial experts recommend having at least a million dollars to live off of once you retire. The folks at CNBC recently calculated several different scenarios with different rates of return on your 401(k).
Let's assume you're calculating for a retirement at 65, with an optimistic 8 percent rate of return on your 401(k). If you're starting at age 25, you're in pretty good shape and just have to save $572.90 per month. If you're 30 when you start saving, plan on contributing $871.88 each month. At 40, you'd have to start by saving $2,102.99 every month. Yikes!
Before you panic over some of these numbers, keep in mind:
- Your other assets count. If you own your home at the time of retirement, then a mortgage is one less hefty expense.
- Many employers match a portion of 401(k) contributions. That's free money every month if you take advantage of it.
- You can always squirrel away money in other ways like dividend stocks, mutual funds, and high-interest savings accounts if you're nervous about locking it all up in a 401(k).
- Don't forget about Social Security; that counts toward what you need as well.
One of the cool things about saving for retirement is that there is no shortage of experts willing to help you out. From online resources to financial planners at your bank, there are many ways you can get started learning how to begin.
For more information, including how much you need to save at lower rates of return, take a look at the CNBC calculations here.
How are you doing on your retirement savings? Let us know about any tips you've discovered, in the comments!