Every dollar makes a difference -- as you'll see.
Most people don't know how much they need to save for retirement, but many are pretty certain they're not saving enough. Finding extra cash to save toward retirement isn't always easy, and it often seems like you need to set aside hundreds or thousands of dollars to make any real difference. But small contributions made regularly begin to add up over time, especially if you start while you're young.
The difference an extra $50 per month can make
To illustrate this, I looked at the difference an extra $50 a month could make to a person's retirement savings over 20, 30, and 40 years. In all cases, I assumed a 7% annual rate of return on investments.
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Let's start with the obvious: If you're not contributing any money to retirement, even $50 per month will make a substantial difference. That monthly contribution could add up to nearly $24,600 after 20 years, $56,700 after 30 years, and $119,800 after 40 years. That's still not enough to retire on, but it's a start. It may even cover a few years of retirement expenses when coupled with Social Security and a frugal lifestyle.
If you regularly save for retirement, an extra $50 per month can considerably speed up the growth of your savings. Someone who sets aside $200 per month for retirement will have about $98,400 after 20 years, $226,700 after 30 years, and $479,100 after 40 years. Bumping that contribution to $250 per month will leave you with $123,000 after 20 years, $283,400 after 30 years, and $599,000 after 40 years. Over 40 years, that extra $50 monthly contribution only costs you $24,000, but your final balance is $120,000 higher because of it.
These examples highlight the benefits of boosting your retirement savings by even a small amount, but it's impossible to determine the exact difference it will make. It depends on what you had been saving for retirement previously, how long your savings have to grow before you need to begin drawing upon them, and your rate of return. But it's safe to say that it could add up to tens or even hundreds of thousands of dollars more by the time you're ready to retire.
Where to find an extra $50 a month
So the benefits are clear. The trouble is finding the extra $50 a month. There are several approaches you can take. One option is to reduce your spending to free up the extra cash. Review your budget and see if there are areas where you could cut back, like reducing how often you dine out or purchase expensive beverages, or by canceling unused subscriptions. Take steps to limit discretionary purchases, like clothing and new tech. You may have to make some lifestyle changes, but it could be well worth it if the extra money saved enables you to retire more comfortably.
Another option is to seek ways to increase your income. This could mean working overtime at your current job, switching fields or employers, or taking a job on the side. You could also consider renting out a spare room in your home or any vacation properties you have.
If your employer offers a 401(k) with a match, make sure you're contributing at least enough to get this full match. This will net you even more for retirement without having to set aside extra money of your own. Just make sure you understand the company's vesting schedule if you plan to leave in the near future. That determines when your employer-matched funds are yours to keep; if you leave the company before you're fully vested, you could lose some or all of your 401(k) match.
Boosting your retirement contributions can seem impossible, but a closer look at your budget may reveal it's more doable than you realized. Even if all you can find is an extra $50 a month, it is still worth setting that extra cash aside. You might be surprised at the difference it makes over time.
FAQs
The difference an extra $50 per month can make
How long will 300k last in retirement? ›
With $300,000 planned for your use as a retiree, a retirement age of 50, and an anticipated life expectancy of 85 years, you need that money to last you 35 years. This should mean that your yearly income is around $8,571, and your monthly payment is around $714.
How long will $400,000 last in retirement? ›
This money will need to last around 40 years to comfortably ensure that you won't outlive your savings. This means you can probably boost your total withdrawals (principal and yield) to around $20,000 per year. This will give you a pre-tax income of almost $36,000 per year.
Is $500,000 enough to retire at 65? ›
This amount allows for an annual withdrawal of $30,000 and below from the age of 60 to 85, covering 25 years. If $20,000 a year, or $1,667 a month, meets your lifestyle needs, then $500k is enough for your retirement.
How much does Dave Ramsey say to save for retirement? ›
When it comes to saving for retirement, money expert Dave Ramsey knows exactly how much you should be setting aside. Ramsey's recommendation, which he shared on his website Ramsey Solutions, is to invest 15% of your gross income into your 401(k) and IRA every month.
What percentage of retirees have $2 million dollars? ›
According to EBRI estimates based on the latest Federal Reserve Survey of Consumer Finances, 3.2% of retirees have over $1 million in their retirement accounts, while just 0.1% have $5 million or more.
What is the $1000 a month rule for retirement? ›
One example is the $1,000/month rule. Created by Wes Moss, a Certified Financial Planner, this strategy helps individuals visualize how much savings they should have in retirement. According to Moss, you should plan to have $240,000 saved for every $1,000 of disposable income in retirement.
How many people have $1,000,000 in retirement savings? ›
1 Those who plan to retire early and/or maintain an upscale lifestyle in retirement should probably save more. Those who plan to retire after age 67 and/or maintain a more frugal lifestyle may get by with less. Approximately 10% of the nation's retirees have amassed $1 million or more in retirement savings.
What's the average Social Security check? ›
Copy link. Social Security benefits are much more modest than many people realize; the average Social Security retirement benefit in February 2024 was about $1,862 per month, or about $22,344 per year. (The average disabled worker and aged widow each received less.)
Is $800,000 enough to retire at 60? ›
As we have established, retiring on $800k is entirely feasible. With the addition of Social Security benefits, this becomes even more possible. Adding in the current average annual Social Security benefit of approximately $22,800 ($1,900 per month) increases your stable retirement income streams.
Get a Part-Time Job or Side Hustle. If you're contemplating retirement with no savings, then you may need to find ways to make more money. Getting a part-time job or starting a side hustle are two ways to earn money in your spare time without being locked into a full-time position.
What is a good monthly retirement income? ›
Let's say you consider yourself the typical retiree. Between you and your spouse, you currently have an annual income of $120,000. Based on the 80% principle, you can expect to need about $96,000 in annual income after you retire, which is $8,000 per month.
Will Social Security run out? ›
When will Social Security run out? According to the May 2024 Social Security trustees report, the fund reserves that help pay for Social Security benefits will run out in 2035. Without congressional intervention, retirees would then only be able to receive 83% of their full benefits.
How much does Suze Orman say you need to retire? ›
Famed financial guru Suze Orman once told Paula Pant on the “Afford Anything” podcast that $2 million simply isn't enough to retire early on. So, how much does she say you will need to live comfortably in your golden years? She advocates saving significantly more — closer to $5 or $10 million in order to retire early.
What is the 80 20 rule Dave Ramsey? ›
There's an 80-20 rule for money Dave Ramsey teaches which says managing your finances is 80 percent behavior and 20 percent knowledge. This 80-20 rule also applies to constructing a healthy life. Personal wellness is 80 percent behavior and 20 percent knowledge.
What to do if you're 60 with no retirement savings? ›
Consider Part-Time Work
Income from part-time work coupled with your Social Security benefit could be all you need to live comfortably. It will certainly make your savings go further. More retirees are opting for this type of arrangement than have in previous generations.
Is $300,000 enough to retire on with Social Security? ›
If you earned around $50,000 per year before retirement, the odds are good that a $300,000 retirement account and Social Security benefits will allow you to continue enjoying your same lifestyle. By age 55 the median American household has about $120,000 saved for retirement, and about $212,500 in net worth.
How much does a 300 000 annuity pay per month? ›
For example, a 65-year-old man who invests $300,000 in a deferred income annuity with income starting at age 80 could receive around $4,000 per month for life, while a woman of the same age could receive about $3,500 per month.
How much money do you need to retire with $100,000 a year income? ›
Remember, these are rough estimates and not a guarantee. So, if you're aiming for $100,000 a year in retirement and also receiving Social Security checks, you'd need to have this amount in your portfolio: age 62: $2.1 million. age 67: $1.9 million.
