Now that the year is wrapping up, it’s a good time to start evaluating where you stand against your saving goals. The two biggest expenses that you likely will have are your retirement and college expenses. Thus, I want to provide you some benchmarks to see if you are on track. Since millennials have many moving parts given their student debt burden, I have also included an "Average Millennial Net Worth By Age" chart from thecollegeinvestor.com listed below.
Retirement
The average social security benefit is just $16,000 per year. The life expectancy for a 65 year old man is 84 years old, while a 65 year old woman can expect to live until 87. As such, we all will need a large nest egg to retire with our same standard of living.
This chart will give you a rough benchmark as to where you and your spouse should stand. If you are 35 and make $100,000 today, you should shoot to have $200,000 saved toward retirement. If you are 67 and earning $100,000, you should aim to have a $1,000,000 nest egg.
College Savings
While we would like to think that we could over the cost with financial aid or scholarships, generally these will not take care of the entire bill. If you recently had a child and have 18 years to save, we would recommend putting away $1,000 annually for community college, $3,000 annually for a public university, and $6,000 annually for a competitive private university.
Average Net Worth for Millennials
Source: The College Investor, who also discusses the average amount of student debt ($25,000-40,000), starting salary ($40,000-51,000) and savings rates (3-8%) by age. Please note, these are simply estimates based off data from the Federal Reserve, who groups everyone under the age of 35 into one segment for their survey.
The author of the sourced article even went on to benchmark "stretch goals" for "high achievers." I would not put too much stock into this chart, as they are simply the author's best guesses. These figures would require you to have an above average income, zero student debt, and/or a very frugal lifestyle. Nonetheless, for those motivated by benchmarks, here is what he came up with:
Would You Like To Increase Your Savings Rate?
- If your checking or savings accounts have more than 3-6 months’ worth of expenses in it, make a one-time contribution to your retirement, college savings, or investment accounts.
- Ask your payroll department to increase your deferrals. Save half of any bonus.
- Contact Alex@fncadvisor.com to analyze where you stand against your goals. Ultimately there are many factors to consider that do not fit perfectly into these benchmarks (paying back your OWN student loans, saving for a home, retiring early or late, etc)