Many young Americans hope to retire as millionaires — and they're pretty optimistic about reaching that goal.
Most Americans believe they'll need to save over $1 million by the time they retire and that amount varies slightly by age group. Those in their 20s think they'll need around $1.2 million saved for retirement while those in their 30s and 40s say they'll need about $1.44 million and $1.28 million, respectively, per Northwestern Mutual's 2023 "Planning and Progress Study."
Those may seem like lofty goals, however a little over half of respondents feel they'll be financially prepared for retirement when the time comes, per Northwestern Mutual's study which conducted 2,740 online interviews of adults in the U.S. over the age of 18.
It's important to note that the amount you'll need to save for retirement will depend on a variety of factors that are unique to you such as where you plan to live, whether you plan to continue working part time and what kinds of health care expenses you'll need to cover.
But say you wanted to set a very ambitious retirement goal. CNBC calculated how much you'd need to put away each month if you wanted to retire with $5 million by age 67. These calculations are based on starting to save at ages 21, 25 and 30 with a beginning balance of $0. They don't factor in unpredictable life events such as market volatility, promotions or layoffs.
And since retirement experts generally say you should save around 15% of your income for retirement, CNBC also calculated what you'd need to earn annually in order to amass $5 million without exceeding that 15% savings rate.
If you start at 21
Earning a 5% annual rate of return: $2,324 per month
- Annual salary needed if you save 10% of your income: $278,899
- Annual salary needed if you save 15% of your income: $185,942
Earning a 7% annual rate of return: $1,226 per month
- Annual salary needed if you save 10% of your income: $147,089
- Annual salary needed if you save 15% of your income: $98,064
Earning a 9% annual rate of return: $616 per month
- Annual salary needed if you save 10% of your income: $73,964
- Annual salary needed if you save 15% of your income: $49,312
If you start at 25
Earning a 5% annual rate of return: $2,922 per month
- Annual salary needed if you save 10% of your income: $350,601
- Annual salary needed if you save 15% of your income: $233,745
Earning a 7% annual rate of return: $1,643 per month
- Annual salary needed if you save 10% of your income: $197,128
- Annual salary needed if you save 15% of your income: $131,425
Earning a 9% annual rate of return: $889 per month
- Annual salary needed if you save 10% of your income: $106,629
- Annual salary needed if you save 15% of your income: $71,090
If you start at 30
Earning a 5% annual rate of return: $3,905 per month
- Annual salary needed if you save 10% of your income: $468,566
- Annual salary needed if you save 15% of your income: $312,393
Earning a 7% annual rate of return: $2,385 per month
- Annual salary needed if you save 10% of your income: $286,185
- Annual salary needed if you save 15% of your income: $190,800
Earning a 9% annual rate of return: $1,410 per month
- Annual salary needed if you save 10% of your income: $169,215
- Annual salary needed if you save 15% of your income: $112,816
Although you may not want to retire as a millionaire, it's helpful to have an idea of how much you may need to save in order to cover your living expenses after you stop working full time. CNBC Make It's retirement calculator can help you figure that out based on factors including your current age, income and savings.
And don't panic if you can't make these retirement contribution amounts just yet. It's OK to start with what you can and increase your contributions over time. One way to do this is to increase your contributions by 1% each year until you reach the recommended 15% savings rate.
But it's important to get started early. By beginning sooner rather than later, you can take advantage of the power of compound interest which helps your money grow exponentially.
"Investing at a young age not only allows your money the opportunity to grow to a level that will have a major financial impact on your future, but also presents an opportunity to learn about investing, try new things, and ultimately set yourself up for a successful financial future," says Joanna Rotenberg, president of Personal Investing, in Fidelity's "Q2 2023 Retirement Analysis."
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CHECK OUT: How much money you'd need to save each month to retire with $1.5 million if you earn $80,000 a year
