The median retirement savings account balance for Americans aged 65 and over was just $88,000 due to medical expenses, according to a report. Pratik Patel, head of Family Wealth Strategies with BMO Family Office, joined Cheddar News to discuss what's needed to save for a comfortable retirement.

Closing Bell

Tips to Build Retirement Savings

Are you saving each month for retirement? It's an important question. And while for some of us it might still be decades away, experts say it is important to start building your nest egg early as it can have a big difference later in life according to report by the investment from Vanguard. The median retirement savings account balance for Americans ages 65 and older. It's just $88,000 as they have to worry about medical expenses and the rising cost of everything in their golden years. So join I mean now is pretty Patel had a family will strategies at Bmo Family Office Party. Thanks so much for joining in. This is such an important conversation. How much do you really need? How much do Americans really need to save up to comfortably retire at the age of 65? Yeah, good question. Um comfortably is the operative word there right for me. I think comfortably means maintaining my quality of life and and maintaining that lifestyle if I was going on vacations while I was working, I certainly want to be able to do that when I'm at retirement. So. So how much you need really depends on On on what you're spending is each year. And there are a number of tools you can use to track your spending but but if you don't have access to that information and we need to find another way. Um I like to use the average household income in America depending on your source is between 65 and 75,000 a year. So at the very least let's try to shoot for 65,000 a year. Alright 65,000 a year. So let's start with that. Is that what you said? So Okay let's let's do the math here a little bit. Let's say you're 30 years old, you put some money in obviously for your retirement. How do you get to a number that is sustainable over time? What are the, do the math for us here? A little bit more fleshed out a bit more. Absolutely. So so you just have the graphic on the 4% rule. Um I love that rule. The 4% rule says you can withdraw safely 4% from your retirement accounts and you won't risk overspending or running out of money. And that's indexed to inflation So that money will last between 30 to 50 years. So the math is you take $65,000 divided by 4%. So .04. And that's the principal amount you need saved to begin withdrawing that 65,000 a year in this case. That's $1.625 million $1.65 million dollars depending on what your initial investment is. And the estimated interest rate 6%. As we see on the screen there as well, monthly contributions just shy of 1000. How do you get to this point critique? I think a lot of people in this environment understandably. So struggling to save, let alone invest. What are the top tips to build your retirement nest egg? Absolutely. I think when I talk to people, we we so often run into this problem where we're just saving for the sake of saving and we're hoping we'll get to that number that we need to to achieve proper and safe retirement. Um The first tip I like to make is understand your number, understand your spending and be very intentional about it. So that means if if you need to save $950 a month And on a given month you you need to cut back on something we can do that. But if we're not being intentional, we're not tracking where we're spending. It's going to be very difficult to to hit that number of long term because like you just showed in that graphic a moment ago, saving $1,000 a month isn't isn't easy for many people. That's not automatic right very quickly before I have to let you go best instruments or tools critique to help someone save for retirement. What are some of them out there? Yeah, obviously take advantage of any company matches your your company might offer your employer might offer. I love Roth accounts because that's a hedge against rising income taxes in the future. Beyond that qualified plans, your iras your 401 Ks. Those give you two tax deductions and tax savings, which can help amplify your savings long term. Um anything you can do to set money aside and put it away long term is really beneficial. But those tools help accelerate some of that savings. Alright, critique Patella, head of family law strategies at BMO Family Office boutique. Thank you.