I Earn $60,000 a Year. How Much Can I Save by Retirement?


Is $1.46 million the amount of retirement savings you should be aiming for? According to a recent Northwestern Mutual survey, that’s the magic number.

Of course, you don’t necessarily have to buy into a specific number just because a survey says so. A better bet, in fact, is to think about what you want your retirement to look like, and then establish a savings goal that meets your individual needs. You can do this alone or with the help of a financial advisor.

If you earn $60,000 a year, which is roughly in line with the median annual wage today, then you may be convinced that you’re not going to end up retiring with all that much money. But actually, you can do very well for yourself on a $60,000 income — if you adopt the right strategy.

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Start early and stay the course

If you wait until your 50s to start funding an individual retirement account (IRA) or 401(k), then you might end up short on savings for retirement. But this holds true whether you earn $60,000 a year or $300,000.

Believe it or not, it doesn’t take a ton of money on a monthly basis to end up with a lot of retirement savings. If you start early and give your money time to grow, you can turn a series of pretty small IRA or 401(k) contributions into a very large sum over time.

To do that, though, you’ll need to be willing to invest your money in the stock market. That’s because you need strong returns to turn your modest contributions into the large number you’re no doubt hoping for.

So what’s actually realistic on a $60,000 salary? Well, let’s assume you can save 5% of your salary each year, which is $3,000. (For the record, experts generally say to save 15% of your salary or more, but on $60,000 a year, that may not be possible.)

In that case, you’re parting with $250 a month that you save and invest monthly for 41 years (say, between the ages of 24 and 65). If your investment generates a 10% yearly return during that time, which is in line with the stock market’s average, you could end up with a nest egg worth $1.46 million — the exact amount of savings Americans seem to think will make for a comfortable retirement.

Make the process automatic

The above numbers assume steady monthly retirement plan contributions of $250, and they also hinge on having a 41-year savings window. If you start later or contribute less money to your savings each month, you’re going to wind up with less in the end.

The point here, though, is that you can retire on a large sum of money even if you only earn a $60,000 annual wage throughout your career. So your best bet for making the most of that salary is to save consistently over a long period of time and to start as soon as you begin collecting a paycheck.

In fact, it pays to automate the process of saving for retirement so it’s something you don’t have to think about. If you have a 401(k) plan through work, signing up will mean having contributions to that account deducted from your paychecks automatically. But since many IRAs offer an automatic savings feature, you can do the same thing in one of those accounts, too.

Of course, you’re by no means doomed to a cash-strapped retirement if you kick off your post-working years with, say, $700,000 in savings. A $300,000 nest egg might also be enough for you, depending on your needs and goals. But now that you’ve seen that it’s possible to retire quite wealthy even with an average salary, you can do your part to work toward that goal if it’s something that’s important to you.

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