More than a year out in Covid crisis, most people have a clearer picture of what it means to be financially secure.
When asked how much money they need to have saved to consider themselves financially sound, Americans put the figure at $ 516,433 on average, according to a new report from financial services company Personal Capital. About 20% said they would need more than $ 1,000,000.
Although the answers varied widely, most said having $ 500,000 in the bank would be enough to cover bills and expenses as well as future needs, including some retirement savings, without concern, the report found.
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“For the average working American, $ 500,000 would be a lot of money,” said certified financial planner Dave Totah, a senior wealth advisor at Exencial Wealth Advisors in Frisco, Texas.
In general, personal finance experts recommend having three months to six months – or even longer – of living expenses on hand in the event of an emergency. For retirement, there are a few simple rules of thumb, such as saves 10 times your income after retirement age.
For many, the pandemic has been one economic awakening it made them reconsider how they plan their future. Still, most people struggle to save enough for a comfortable pillow.
Before the pandemic, a Federal Reserve Report found that 40% of Americans would have difficulty paying for an unexpected expense of $ 400. A study published by Bankrate.com in January indicates that these cash reserves are still lacking for many people, with only 39% of people being able to pay for a $ 1,000 emergency expense out of savings.
Only 19% of Americans have enough to cover three to five months, and 25% have enough to cover six months or more, Bank rate was also found. Only 17% of adults said they have more emergency savings now than they did before the pandemic.
And still, more than half of Americans or 51% have less than three months saved in an emergency fund.
To boost your savings, Totah recommends reducing your expenses to begin with. “Look hard at your budget, you can cut things’ nice-to-have ‘out and cut out a little extra savings.’
Then shock your 401 (k) contribution or at least contribute enough money to get the company’s full matching contribution. “You can pick up some more free money that way,” he said.
Totah also advises clients to put some money aside in one health savings account. Not only is the money contributed to an HSA deductible, but both earnings and payouts – as long as they are for health care expenses – are not taxed either.
“It’s a great way to save tax-free,” he said.
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