If you haven’t begun saving for retirement, you’re not alone. More than half of Americans have less than $10,000 saved for their golden years, according to a 2017 GOBankingRates study.
However, being so far behind in savings does not doom you to poverty. Even if you are relatively far along in your work life — maybe you’re 55, or even 60 — all is not lost. It still is possible to save $500,000 between now and the age of 70 or 75.
Let’s say you are starting today with nothing saved for retirement. Here is how much you must squirrel away to reach your goal of $500,000 over 15 years based on various rates of return for your investments:
Without a doubt, amassing that $500,000 in such a short time frame is going to be a challenge. But keep in mind that the S&P 500 has averaged an annual return of nearly 10 percent since 1928.
Of course, there are no guarantees the market will continue to rack up such large gains going forward. John Bogle — the founder of the Vanguard Group investment firm, and one of the most respected names in the world of investing — has estimated that returns are likely to be muted over the next decade, perhaps as low as 4 percent annually.
Others disagree. But in truth, you cannot control market return. On the other hand, you have much greater control over how much you save and spend.
Get started on your retirement nest egg
If you are just starting to invest for retirement, take the advice of Money Talks News founder Stacy Johnson. He urges you to skip those online retirement calculators and to avoid overthinking your savings plan. Instead, simply save and invest as much as you reasonably can:
At the end of the day, the amount we should all put aside for retirement is the most we can. You don’t need a calculator to tell you that’s the sole determinant of the quality of retirement you’ll have and when it will begin.
Of course, changing your saving habits will take time. Just as you can’t go from a couch potato to a marathoner in a few weeks, you need to gradually transition to your new, more financially responsible lifestyle.
In “Resolutions 2018: Save More Money Using 5 Fun Tricks,” we outline several ways that you can slowly add fuel to your savings strategy. One is known as the “52-week savings challenge.”
The idea is simple: Each week, save an amount of money based on the week of the year. So, the first week of the year, you put $1 aside; the second week, it’s $2; and the last week of the year, you save $52.
Obviously, you’ll need to supercharge this strategy if you hope to reach your goal in 15 years. But any step in the right direction is a good one. As the well-worn — but true — axiom goes, “A journey of 1,000 miles begins with a single step.”
If you are getting a late start, check out “Ask Stacy: How Do I Invest for Retirement Without Risk?” In this video, Stacy offers tips to investors in their 60s who are trying to build a nest egg while earning “decent returns without indecent risk.”
And if you doubt your ability to save — and need a little inspiration — read “How I Wiped Out $37,000 of Debt in One Year.”