YOUNGSTOWN, Ohio (WKBN) – It’s been said it is never too early to start saving for retirement. But, how much is enough?
What if you had half a million dollars when you retired? Would you be surprised to find out it may not be much to live off of?
We broke down some numbers to see what retirement will be like if you start saving early.
“Are we gonna rely on the government for our own retirements? So that’s why it’s so important to be good savers. I mean, you have to start young,” said Christopher Mediate, of Mediate Financial Services.
There are different ways to save for retirement. You can put money into a savings account from every paycheck. Many people are offered a 401K plan through their employers. There are also different types of IRA accounts.
Whichever route you choose to go, the earlier you start, the more money you will have for retirement.
If you retire at age 67 with $500,000 saved, you have to plan how the money will be spent over the years.
The average life expectancy in the U.S. is 78 years. This means you would have to make $500,000 stretch 11 years.
This would average out to you having around $45,000 a year.
But, what if you live past 78? Let’s say you live to be 90. That would give you about $22,000 a year to spend.
Is that enough?
$500,000 may seem like a lot, but Mediate says there are a lot of costs that you should consider when planning for retirement.
“I gotta account for inflation, risk, taxes, so you realize that a lot of it’s not just the investment plan. Is Social Security gonna be there? Do I have a pension?,” Mediate said.
A person who starts saving at 30 years old would have to save $1,126 a month to have $500,000 at the age of retirement.
For some people, it may be better to invest than to just save each month. When you invest, the money you are saving builds interest and grows.
For example, investing in a Roth IRA account allows your money to grow over time. If you contribute $3,000 a year for 30 years, you have the possibility of retiring with $245,000 in your Roth IRA account.
Some people have started saving for retirement in their 20s to get a head start. There are even mobile apps that help you save.
Hannah Telesz is a producer at WKBN. She is in her early 20s and felt it was important to start saving now.
“My friend had mentioned that he was doing this Acorn thing, and I was like ‘oh it takes the round us,’ I didn’t even think about the retirement part,” Telesz said.
After downloading the app called Acorn, she said she began using it to add money into a retirement fund.
She says the app is convenient and easy to use. She said there are also no penalties if she chooses to withdraw her money. The money she puts in gains interest as well.
Telesz said saving, whether it be for retirement or for now, is important.
Whether you choose a more traditional route, like an IRA account or a 401K, or if you go the mobile way and use an app, saving for retirement early will help you down the line.