The key to financial well-being can be a cool half a million. While the factors that determine financial stability may vary for each investor and retirement saver, a recent survey by Empower Retirement and Personal Capital found that most Americans believe it takes more than $500,000 in savings to become financially healthy. The survey, conducted by The Harris Poll, interviewed 2,005 people across age groups, racial and ethnic backgrounds, life stages and employment sectors to get their views on financial well-being.
A financial advisor can help you create a plan to achieve your financial goals, whether it’s saving $500,000, saving for college, or buying a home. SmartAsset’s matching tool can match you with up to three local advisors in just five minutes. If you’re ready to find an advisor, get started now.
$516K: The Magic Number for Financial Wellbeing?
The poll found that Americans’ views of financial well-being evolve as they move through different stages of life or experience significant “perspective-changing events.” However, Americans think the average amount of money needed to achieve financial well-being is $516,433, according to the survey.
The survey found that Americans don’t feel financially healthy until age 47. In addition, they said that at age 49, they think other people feel financially healthy.
“While many Americans think financial well-being is attainable, less than half say they are financially healthy today,” the study states.
From Broke College Grad to half a million by age 47
So how does someone actually save $500,000 after starting with almost nothing? Take Nicole, a 22-year-old college graduate. Despite graduating with minimal debt, she starts with only $100 to invest. Using SmartAsset’s investment calculator, she was able to determine exactly how much she needs to invest each year to reach her goal of saving more than $500,000 by age 47.
Assuming an annual return of 8%, Nicole will need to invest $7,050 per year to have more than $516,000 within 25 years. That means she has to set aside $587 each month to invest. Of course, Nicole’s ability to save at that rate depends on a number of factors, including her income, her expenses, her budgeting and the cost of living in her area.
Saving $500,000 despite starting later
Of course, not everyone can start investing right out of college. Tens of millions of Americans are saddled with student loan debt, owing a total of $1.73 trillion, according to EducationData.org. Even if a college graduate can’t start investing until he pays off his loans, the person can still achieve the perceived level of financial well-being at age 47 by putting more emphasis on their savings rate.
Derrick, a 30-year-old college graduate who has just finished paying off his student loans, has less time to invest than Nicole, so he will have to invest more money each year. Starting with just $100 and an average return of 8%, Derrick will need to invest $15,300 each year or $1,275 per month to have more $516,000 saved by age 47. Again, this may be easier said than done depending on Derrick’s expenses and income. potential.
Roadblocks to achieving financial well-being
For many Americans, saving and investing thousands of dollars a year can be daunting. The Empower Retirement and Personal Capital survey found that nearly 7 in 10 Americans face at least one obstacle in their financial life, while the average person faces at least two.
About 27% of survey respondents said that being underpaid is the number one obstacle they face, while another 23% said that overspending is the number one obstacle they face. All told, 19% of people said they’re “not in a place where I can save.”
But Americans are willing to lend a helping hand. Nearly 80% of respondents said they need help optimizing their financial well-being, highlighting the need that financial advisors fill. Of those people, 32% said they could use help paying off debt, while 30% said they would like help setting up an emergency fund. The survey found that 28% of respondents said they needed help with their investment strategy.
It boils down
What financial well-being means to you will probably differ from the next person. But Americans, on average, think it takes more than $516,000 to become financially sound. This savings goal can be achieved by investing early and often. While a number of roadblocks can prevent ordinary Americans from becoming financially sound, making a plan and sticking to it can help them invest successfully. Expert financial advice can also help investors build a winning game plan.
Financial wellbeing tips
Get expert financial advice. According to the Empower Retirement and Personal Capital survey, about 78% of Americans said they need help optimizing their financial well-being. A financial advisor can help you create a plan to achieve your financial goals, whether it’s saving $500,000, saving for college, or buying a home. SmartAsset’s matching tool can match you with up to three local advisors in just five minutes. If you’re ready to find an advisor, get started now.
Start by asking yourself basic questions. Do you stick to a budget? If not, create one with SmartAsset’s budget calculator. Do you have sufficient emergency fund. Experts recommend cutting costs between three and six months. Are you on your way to retirement when you want to? If you’re not sure, check out our retirement calculator to track your progress.
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