The average American thinks he needs to save $ 1.9 million for retirement.
Still, only about half of those polled are confident they’ll get there, according to a study by financial services firm Charles Schwab.
For some just starting out in their careers, the figure of nearly $ 2 million may seem particularly overwhelming.
If that’s your case, we’ve explained a few ways to save enough money so that you can comfortably retire in our step-by-step guide below.
Analyze your assets
The first thing you’ll want to do is explore your assets, what they’re worth now, and what they might be worth in the future.
Assets can range from what’s in your bank account to holdings in investments.
Right now you might only have $ 5,000 in your bank account, but these might be worth more than you think.
For example, if you recently bought a home and plan to pay off most or all of it over time, it could increase in value significantly.
In the past twelve months, real estate appreciation has climbed 14.5%.
Of course, this will depend on the location and the state of the real estate market, but it could take 10 to 20 years for your home to double in value, according to home services company Homex.
Next, look at your investment portfolio. Maybe your holdings are currently only worth between $ 3,000 and $ 5,000.
But if you continue to hold, your portfolio could increase in value over time.
Suppose your investment portfolio keeps pace with the S&P 500, an index that tracks the performance of the top 500 companies.
Over the past decade, the S&P 500 has gained over 280%.
If you had that $ 5,000 in your investments ten years ago, it would be worth $ 19,000 now.
And if you paid $ 300,000 for your house, it could be worth $ 600,000 within 20 years.
But as with any investment, keep in mind that you are not guaranteed to make any money, and the value of your assets could potentially drop.
It is also worth calculating how much you are supposed to receive in Social Security benefits, if any.
Open an IRA or 401k
Once you’ve analyzed your assets, you’ll want to start planning to hit that $ 1.9 million goal.
Americans save for retirement with 401k plans offered by their employer.
These plans allow employees to allocate a portion of their income to a long-term investment account.
You’ll need to check with your employer, but some companies will agree to pay up to 5% of each paycheck.
If your employer doesn’t offer the 401k, you can open an Individual Retirement Account (IRA) with a brokerage.
Along with Charles Schwab, some brokerage firms that offer IRA services include Fidelity, TD Ameritrade, and Merrill Edge.
Calculate how much you need to save and start early
Now that you have your retirement account, it’s time to figure out how much you need to save and when you should start.
The earlier you start the better, as silver expert Tiffany “The Budgetnista” Aliche also noted.
She wrote in a blog post: “Your 20s is a good time to start because it is the time in your life when you can afford to set aside a large chunk of your income.
“Retirement may seem far away, but it will be here sooner than you think. “
Specifically, personal finance company NerdWallet estimated how much you need to save per month based on how old you started.
If you start at 25, NerdWallet estimates that you will need to save $ 881 per month to reach $ 2 million in savings at 67.
This assumes an annual return on investment of 6%.
Plus, NerdWallet has a retirement tool that calculates how much you’ll get at 67.
To determine this, you need to enter your pre-tax salary, age, current savings, and how much you expect to save each month.
How to close the gap
Others, meanwhile, might not be able to save hundreds of dollars a month at first because of all their expenses.
Expenses include everything from rent or mortgage payments to daily expenses.
If you’re not saving enough, take a look at your last monthly statement and see where you’re cutting costs.
Maybe you’re spending too much money ordering food through delivery apps, or spending too much money at Starbucks.
Instead of spending over $ 40 a week at Starbucks, try buying K-Cup pods for your coffee maker.
At Target, you can buy 22 Starbucks House Blend K-Cup pods for under $ 20. This could get you through most of the month, depending on how often you drink coffee.
A 2018 Forbes study found that consumers spend five times as much on food delivery than on cooking at home.
Finally, as long as you are in good health, you could put your retirement back a few years if you fall too far behind.
But the sooner you start saving, the better and the more likely you are to reach the $ 1.9 million goal.
We’ve rounded up the best 401k growth calculators for saving for retirement.