Americans are increasingly looking for the best ways to become a millionaire by the time they reach retirement.
Young savers who want to retire within 30 years without “lifing a finger” will need to save $507, the equivalent of £407.70, according to experts.
The majority of savers take advantage of savings accounts, such as 401(k)s and IRAs which are useful tools in helping people secure a sizable sum once they retire.
However, experts are warning that people need to learn how to prepare for when they leave the workforce.
It should be noted that how much someone can live on in retirement depends on where they live and their expenditure.
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However, for the average person looking to become a millionaire, analysts are highlighting that people in their 20s and 30s will need to save around £407 a month to reach this goal.
This analysis is based on commentary from personal finance writer Christy Bieber who shared that this factors in someone preparing a 30-year plan for retirement.
Writing for The Motley Fool, she broke down how the amount someone needs to save for retirement differs depending on age.
The personal finance expert explained: “If you have 30 years to retirement and earn 10 percent average returns, for example, you would need to invest about $507 (£407.70) per month.
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“But if you have five years until retirement and earn the same 10 percent returns, you’d need to put away $13,649.77 (£10,976.46) a month.
“If you want to become a millionaire retiree without lifting a finger, you likely aren’t interested in trying to come up with over $13,000 (£10,453.95) in spare cash each month for your 401(k).
“So to make hitting your savings targets more effortless, begin the process of investing at least some money right now. It’ll make your life a lot simpler later.”
The two primary retirement savings accounts primarily used by Americans are 401(k)s and IRAs, which stand for Individual Retirement Accounts.
What is a 401(k)?
This particular account is employer-sponsored which means companies match the contributions of their workers.
There are two different types of 401(k) savers can pick from: a traditional account or Roth account.
When it comes to the traditional 401(k), savings contributions from employees reduce taxable income while withdrawals are subject to tax.
However, for the Roth equivalent, there are no tax deductions for employee contributions during the year but withdrawals are allowed.
What is an IRA?
An Individual Retirement Account is a long-term and very popular savings account.
This particular retirement fund was created mainly for people who are self-employed individuals.
Furthermore, it is also reserved for those who do not have access to other retirement savings products, such as the 401(k).
