How much others have saved doesn’t affect my goals because I need to focus on making sure my emergency fund covers my personal needs.
It can be interesting to look at how much other people have saved for retirement. It’s exciting to see how your own savings compare, especially if you’re doing better than the average American. If you’re not quite on track, looking at where others are can also motivate you to save more.
While this insight into other people’s financial situations may be fun, it is not at all helpful for your own planning. And if you spend too much time checking how you compare to others, you could make mistakes that will cost you dearly.
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My own retirement planning has nothing to do with looking at averages
As a financial writer who keeps a pretty close eye on important financial numbers, I definitely took note of the Motley Fool study showing that the average retirement savings account balance in the U.S. is $87,000. This was only interesting to me from a professional perspective, though, because knowing where people stand will hopefully help me give better advice.
However, when it comes to my own retirement savings, this number will not make a difference. I will not change my account contributions, even though my 401(k) and IRA balances are already above the median. And there is a very good reason for that. My own retirement goals are based on My desired plans for my future. I may want to retire earlier or later than my peers, my income may be different than that of the average American, and the amount I want to spend in retirement may be different from the norm.
The reality is that no two retirement phases will look the same. We all start with different goals, money habits and assets, and these determine how much money we need for our later years. Comparing yourself to others, even people the same age or with the same income or retirement target date, will not help You Make the dreams you have set for yourself as a retiree come true.
I do this instead of comparing myself to others
Instead of letting other people’s finances guide my decisions, I took a very different approach when setting my own retirement goals. Here’s how I did it:
- I assumed I would retire and claim Social Security benefits at age 62, the youngest age at which benefits are claimed. I’m not doing this because I plan to retire early, but because I want to be prepared in case it has to happen.
- I have set a goal to replace at least 90% of my pre-retirement income because I don’t want to make my lifestyle worse in retirement.
- I broke my big goal down into smaller ones and figured out exactly how much I needed to save each month so that my investments would supplement my retirement payments and provide me with the income I needed.
It definitely takes some time and effort to set concrete, personal goals for retirement, but it’s the only way I can make sure I’m on track to build the future I want. The savings goals I’ve set have already helped me build a larger than average bank balance, but that doesn’t matter, so I’m going to keep going.
If you want to achieve your own retirement dream, don’t worry about how you compare to others. Make a plan that will give you the money you need for the retirement you deserve, and don’t worry about what the people around you are doing, because your personal retirement is all that matters to you in the end.
