But barely anyone is doing it.
$632 every month.
That’s how much the average person in American needs to save to be able to send two kids to college and retire on time, according to a new analysis by personal finance site SmartAsset www.smartasset.com. This assumes a 5% return on investment and that the person saving is 30 years old, will retire at 65 and will send the two kids to in-state college at about the age of 50. (The full methodology is listed here and includes data from the Bureau of Labor Statistics and Economic Policy Institute.)
Of course, this monthly savings number varies significantly depending on where in the country you live. Those living in the Northeast, Hawaii and California must put away significantly more each month (often $900 or more per month) — some of that because of the high cost of living in those places in retirement. Meanwhile, those living in states in the middle of the country and the south — most notably Mississippi, Wyoming and Idaho — tend to have to put away less. “Just as high cost of living has an impact on places like the northeast and California, a lower cost of living lowers the savings threshold in some of the less expensive places,” explains AJ Smith, SmartAsset’s vice president of financial education.
How much you need to save to each month to send two kids to college and retire on time
Most Americans aren’t even close to saving $632 every month. More than four in 10 parents (43%) aren’t saving a dime for college, according to data from Sallie Mae. And about the same percentage aren’t saving anything for their own retirement.
What’s more, many Americans, parents included, aren’t saving at all — no matter the cause. Data released in 2017 from GoBankingRates.com found that nearly 57% of Americans say they have less than $1,000 total saved in their savings account, and 39% say they have nothing; and a survey released last year by Bankrate found that nearly 60% of Americans wouldn’t have enough savings to pay for a $500 expense if it came up unexpectedly.
So how does one manage to save that $632 per month for retirement and college? First step:, contribute to your employer’s 401(k) up to what they match (that’s free money and can help you far more quickly meet your savings goals) and more, if you can. Experts also recommend using the 529 plan to save for college, because like a 401(k), it has tax advantages. This guide offers more savings tips.
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