It’s rare that our sentiment matches reality, but such is the case in Charles Schwab’s retirement survey. According to clients and Schwab, $1.7 million is the right number for a comfortable retirement for a typical retired couple. Of course, reality looks quite a bit different for the normal retired couple with average retirement savings checking in at about a fifth of that amount. The real issue isn’t earning power. It’s poor saving and investment choices.
The average 401k is up 466% over the past ten years. The problem is that only about half of people with access to one use it. And of them, the usual contribution rate is only about half of what it should be. According to Schwab, the regular person making the average income in their 20’s, would be well on track to achieve this level of relative wealth if 10% of their earnings went into their 401k or a retirement account. With most companies offering a match, that's even less of a burden than allocating 10% pretax. It’s just a matter of doing it. If you’re thinking of a magic number for a comfortable retirement this is it.
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