3 steps to $1.9M in retirement savings

The average American thinks they'll need about $1.9 million to retire comfortably, according to a recent Charles Schwab survey. But only about half of those surveyed feel confident they'll be able to save enough. It can definitely be a daunting task, but if you have a solid strategy in place, it's possible to save $1.9 million -- or whatever amount you feel you need to retire. Here are a few tips to get you started.

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1. Assess what you have

The first step is to make note of what you already have. Write down the balances of all your retirement accounts, and don't forget about old accounts from previous employers. Consider migrating those to an IRA so you can more easily manage your money in one place.

If you qualify for a 401(k) match through your job and you plan to claim it, make a note of how much this is. Don't forget to count it when determining your monthly contributions. You may also want to create a my Social Security account to estimate how much you can expect from Social Security once you retire. This will influence how much you must save on your own.

The other thing you need to assess is how much time you have left to save. If you have a target retirement age in mind, subtract your current age from this to figure out how many more years you have until retirement. If you don't have a definite retirement date in mind, you can play around with a few different scenarios until you find one that works for you.

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2. Calculate how much you need to save

Figuring out how much you need to save to reach $1.9 million, or whatever your retirement number is, shouldn't be too difficult once you have the above information. Most retirement calculators will do the work for you. You'll have to decide what investment rate of return to use. A good estimate is 5% or 6% per year. Your investments might grow faster than this, but by using a lower estimated rate of return, your plan won't get thrown off too much by a recession.

Don't be surprised if you have to save over $1,000 per month. A 30-year-old with a $25,000 nest egg already who wants to save $1.9 million on their own by 65 would need to set aside about $1,238 per month to reach that goal, assuming a 6% average annual rate of return. And a 35-year-old would need to save about $1,794 per month, all other factors being equal, because they'd have five fewer years for their money to grow.

If that sounds impossible, don't worry. Many married people can count on their spouses to help them reach their goal. And even if you're saving alone, there are things you can do to make hitting your retirement savings target a little more manageable.

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3. Find ways to close the gap between what you have and what you need

Delay retirement

There are several ways to solve the problem of not being able to save enough for retirement. One of the simplest is to delay retirement by a few months or years. Doing so gives you more time to save and allows your existing retirement savings to grow for longer before you must draw upon them. It also shortens the length and cost of your retirement.

But it's not a foolproof plan. Illness, injury, job loss, and caretaking duties force people into early retirement all the time. So while you can plan to delay retirement, it shouldn't be the only strategy you rely upon.

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Increase income

You can also look for ways to increase your income, like claiming your 401(k) match if you're not already, working overtime, pursuing promotions, switching employers, or starting a side hustle. If you're able to reduce your discretionary spending, you may also be able to increase your retirement contributions.

Reconsider your investments

Ideally, you don't want to pay more than 1% of your assets in fees every year, as this hampers the growth of your savings. Your investment prospectus should tell you something about how much you're paying in fees.

It may not appear as a dollar amount. Expense ratios for mutual funds and exchange-traded funds (ETFs) are often written as a percentage of your assets. A 1% expense ratio means you owe the fund manager 1% of whatever you have invested in the fund every year.

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If you're trying to keep these low, index funds are a good bet if you have access to them. They instantly diversify your savings and they're known for being affordable while providing strong returns.

The above tips can help you start on crafting a retirement plan, but don't fall into the trap of thinking you only have to do this once. Your retirement plans or financial situation could change between now and your retirement. If that happens, you need to tweak your plan to keep yourself on track. Revisiting your plan at least once per year will give you confidence that you're still heading toward the future you want.

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