The biggest money-related fear for Americans is “never being able to retire,” according to a new survey conducted by GoBankingRates. That is not too surprising since many respondents reported that they are already struggling to manage their near-term financial challenges. One in five surveyed adults, for instance, said that they are afraid they will always have to live paycheck to paycheck, and 18 percent said that they are worried about being in debt forever.
Such money troubles can often seem insurmountable but economic growth in the United States will eventually return to its historic average, which means that wage growth should also be notably higher. This earnings boost will enable more Americans to shore up their balance sheets and start making real preparations for retirement. A natural concern, though, is that these improvements will take so long to manifest that there will not be enough time left to accumulate an adequate retirement nest egg. However, it may be surprising just how much wealth can be generated in a relatively short period of time.
For example, individuals aged 50 or older can contribute $24,000 a year to a tax-advantaged 401(k) retirement plan, i.e. the standard $18,000 limit plus another $6,000 in “catch-up contributions.” A person with no savings at age 50 who begins contributing the full $24,000 each year can amass over $300,000 by age 60 and more than $1 million by age 70, according to Motley Fool estimates. Of course, saving $24,000 a year may seem a bit daunting for many individuals but even setting aside just $1,000 a month in a 401(k) can generate more than half a million dollars over a 20-year time horizon, and simply maxing out an IRA can help a 50-year-old accumulate around $300,000 by age 70 (ibid).
Sources: GoBankingRates, The Motley Fool
Post author: Charles CouchDisclosures