How Much Should You Save for Retirement?

I never thought about being a millionaire. In fact, I have always been happy living on a smaller income. Perhaps because of my professional background working for nonprofits, I never considered becoming a millionaire as a possibility.

Recently, I learned about super savers, a small internet community of people who commit to saving upward of 20 percent of their annual income. They frequently reach surpluses of $1 million in their brokerage accounts on which they will live comfortably throughout retirement.

The Super Saver Strategy

Some people want to have that amount in the bank by the time they’re 40, some by 50, but all aim to meet their goal before they reach the standard retirement age. When I first heard about this idea of reaching a million dollars, I was intrigued, though I thought only someone making $70,000 or more could achieve that much in savings.

But when I read that one super saver was working as a state employee, I was inspired. I don’t know how much she was making, but she intended to retire at 66. That’s later than many of the other super savers, but she’d retire a millionaire nonetheless. Her story made me feel that anyone could do it.

To reach their goal of $1 million, many super savers cut back on entertainment, dining out, and buying things they don’t need.

They budget every cent they have. They have no debt, and they have an income that allows for extra padding. In other words, they aren’t living paycheck to paycheck.

Millennials’ Savings Strategies

Most millennials feel that they have good financial habits. But the average millennial has many financial obstacles, including student debt, low wages, and rising housing costs.

Even so, millennials are saving where they can. In fact, they’re more likely than Gen Xers or boomers to set and meet their savings goals, according to a 2018 survey.

After seeing what happened to their parents, millennials are more cautious about money. They saw how quickly people can lose their jobs and savings during the 2008 Financial Crisis and aren’t willing to take the same risks. Even so, it’s still difficult for many people to create an emergency fund, let alone save for retirement.

So How Much Should You Save for Retirement? My Take

My partner and I are big savers, but nowhere close to super savers. We track our spending, but we don’t overdo it.

We know where we spend the most money and what costs we can cut.

With $1 million by 50, what could we do? We would travel in style all the time. Our last (and only) trip in first class was so worth it, but it’s a luxury to have that many points or that amount of cash. We would study for pleasure, not because it would enhance our professional careers. We would be able to afford a house in the neighborhood we want and purchase a few investment homes to maintain a steady income.

But is it worth it? To reach the million-dollar mark, we’d have to do a major overhaul of our saving habits.

According to my calculations, my partner and I would need to save around $2,100 a month with a 6 percent rate of return to become millionaires by the time we’re 50.

To do that, we’d need both of us to work full time and put the entire second salary into savings. As a freelancer, I would need to be making more than double the income that I make now to cover monthly expenses, especially after taxes are taken out.

And we could no longer afford organic food or most kinds of entertainment. We also wouldn’t be able to buy a house, since the down payment would come out of our savings, not to mention other major costs associated with moving and buying a home.

Suddenly, the idea of saving all our money until we reach retirement isn’t that appealing. Would we be enjoying everyday life now if we were so focused on saving for the future? Would we restrict ourselves so much that we would feel guilty about any new purchases when we know the money saved is potentially worth more?

The Bottom Line

Perhaps someone else can swing it, but where’s the fun in living if you aren’t living in today? We agree 100 percent that we need to save for retirement — and we are. But we also want to enjoy life while we can. Money isn’t everything. If we’re working so hard that we can’t enjoy the present, that money isn’t worth anything.

I know that may be a weird thing to say on a financial literacy website, but I truly believe that money is only a part of happiness. It’s not about the kind of house you can buy or the fanciest technology you can afford, but about living a life that is frugal and personally satisfying.

It’s about being able to know what you need financially to be stable, and I’m confident that while we might not become millionaires, we are saving enough to both live and retire comfortably. And in the end, isn’t that more than enough?

Additional reporting by Connor Beckett McInerney.