It’s generally a given that a monthly social security payment will not be enough to retire when the magic retirement age comes around.
In the U.S., you can take social security as early as 62. There are calls to raise the retirement age in France and Great Britain whereby you can receive your social security-like pension—64 and 68, respectively.
But there’s good news for homeowners in the U.S. and England who have owned their property for decades and have been paying religiously on their monthly mortgage payments. It’s called a reverse mortgage. If you’re 62 or older, you can apply for a reverse mortgage. If approved, you can tap into all that equity you’ve built in your home for decades. Some proceeds can run into hundreds of thousands of dollars.
The best part about a reverse mortgage is that you need never pay it back until you leave the house or die. It’s a win/wins for retirees who haven’t saved enough to live on once they reach their 60s.
But what about the new trend that’s occurring with Gen Zers who wish to retire not at the required ages but at or even before they hit 60? What should they start doing to make the minimum $2 million they will need in their golden years to live comfortably?
According to a new report by CNBC, the youngest members of the workforce are said to have no intentions of hanging around the workplace as long as their parents and grandparents did. Gen Zers between the ages of 18 and 25 generally aim to retire by the time they hit the ripe old age of 59, that is, according to a study conducted by Northwest Mutual’s 2022 Planning and Progress report. Accordingly, millennials between the ages of 26 and 41 plan to keep working until they’re 61.
How Much is Enough?
American workers believe they’ll need close to 2 million dollars to require comfortably, or so says Charles Schwab, who recently conducted a poll. This number varies by generation. Gen Xers and millennials believe it will be possible to put away around $ 1.5 million to $2 million, respectively.
Says a Vanguard “How America Saves 2022” survey, even though financial planners typically suggest saving between 10 percent and 15 percent of your gross annual income for your retirement years, the typical worker who enjoys an employer-sponsored retirement plan will only contribute around 7 percent of their income toward that goal of early retirement.
But it only makes sense that the shorter you spend in the workforce, the more money you’ll need to put away to meet the financial goals of your retirement years. With this clearly in mind, CNBC calculated how much Gen Zers will need to put away every month to retire with $2 million by 59. They also determined how much they would need to earn to accomplish this goal without having to save more than 15 percent of their income.
The calculations do not consider unforeseeable factors such as unemployment, family or personal sickness, market volatility, recessions, and more.
What You Will Need to Save Every Month to Retire at 59 With $2 Million
Starting at 25 years old:
If you earn a 4 percent annual rate of return, you can save $2,301.22 every month.
If you save 10 percent of your annual salary, you will require a yearly income of $276,146.
If you plan on putting away 15 percent of your earnings, you will require an annual income of $184,107.
Starting at 30 years old:
If you earn a 4 percent annual rate of return, you can save $3,052.80 every month.
If you plan on saving 10 percent of your annual salary, you need an income of $366,336.
If you plan on saving 15 percent of your annual salary, you need an income of $244,236.
Starting at 35 years old:
If you earn a 4 percent annual rate of return, you can save $4,147.15 per month.
If you plan on saving 10 percent of your annual salary, you need an income of $497,658.
If you plan on saving 15 percent of your annual salary, you need an income of $331,788.
While most Gen Zers and millennials are said to be confident, they can meet these early retirement goals, most admit that their present financial situation will require vast improvement. With the U.S. and much of the globe either already experiencing or about to experience recession and the jobless market that goes with it, those Gen Zers and millennials with their hearts set on retiring early with two million bucks or pounds in the bank might want to consider a plan B.
Read more:
What Gen Zers Across the Globe Need to Know About Retiring at 60
