Imagine yourself sitting on a beach, the waves gently lapping against the shore as you sip on a drink with a tiny umbrella. That’s the dream of a $2 million retirement. The idea of kicking back without a care in the world, because you’ve saved enough to enjoy your old age in style. But here’s the twist: How many people actually realize that dream? Can you guess what percentage of retirees manage to stash $2 million in the bank before they retire?
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Spoiler Alert: It’s a small part
The dream of retiring with $2 million is, for most, just a dream. According to the Federal Reserve’s Survey of Consumer Finances, only 3.2% of retirees have more than $1 million in their bank accounts. And if you’re aiming for the $2 million club? Well, the number of people who make it is even smaller. We’re talking a fraction of a fraction—somewhere between that 3.2% and the minuscule 0.1% who have $5 million or more.
See also: Can you guess how many people retire with a $5,000,000 pension? – How does this compare to the average?
How does $2 million compare to the average savings account?
The average retirement savings account for people 65 and older? Just $232,710 in 2022, according to Vanguard. That’s less than one-tenth of $2 million! Even when you look at different age groups, it’s clear that the $2 million mark is out of reach for the vast majority. People aged 65 to 74 earn an average of about $609,230; for those 75 and older, that number drops to $462,410. Both numbers are impressive compared to the general population, but they’re still a long way off from that magic $2 million mark.
What makes the $2 Million Achievers unique?
So, what’s the secret to those few who make it to $2 million? It’s not all luck – although that never hurts. Several key factors come into play:
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Start early: Time is your friend when it comes to saving for retirement. Start at age 25 and you’ll need to save about $5,677 a year to reach $2 million by age 72, assuming a 7% annual rate of return. Put it off and the numbers get a lot scarier.
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Consistency is key: It’s all about regular contributions. Financial professionals often recommend putting aside 10-15% of your income for retirement. It’s not glamorous, but it works.
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Smart investing: It’s not just about saving, it’s about making your money work for you. Stocks, index funds, ETFs: these tools have historically delivered the best returns. Simply leaving money in a savings account isn’t enough.
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Higher income, higher savings: Like it or not, people with higher incomes have an easier time saving big. The top 10% of households have an average of $769,000 saved for retirement.
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Education matters: College graduates typically have more than three times as much retirement savings as people with just a high school diploma. It’s a reminder of how education can impact your financial future.
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Homeownership helps: Homeowners tend to have much more saved for retirement—267% more, to be exact. They have an average of $303,000 saved, compared to renters.
Trending: The number of 401(k) millionaires is up 43% from last year — Here are three ways to join the club.
Is $2 Million Enough?
Here’s the thing: Even if you make $2 million, is that enough? The answer isn’t one-size-fits-all. It depends on where you live, your lifestyle, your healthcare needs, and whether you plan to continue working part-time. For some, $2 million might be more than enough. For others, it might just be the tip of the iceberg.
But one thing is for sure: Reaching that $2 million milestone will put you in an elite group of retirees. Is that enough? That depends on you and your unique situation. It may be a smart move to discuss your goals with a financial advisor. These experts can help you develop a plan to reach your retirement or other financial goals.
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This article Can You Guess What Percentage of People Actually Retire with $2 Million in Savings? Here’s a Hint – Aim Really Low originally appeared on Benzinga.com
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