Pay Attention: Tips To Saving Your First $100K

The 2024 Planning & Progress Study by Northwestern Mutual found that Americans estimate they will need $1.46 million to retire. That number goes up as the generations get younger. Generation X believes the magic number is $1.56 million, while Generation Z and millennials think the range of $1.63 million to $1.65 million is more realistic for their retirement goals.

Yet, according to the Federal Reserve's 2023 Survey of Consumer Finances (via USAFacts), many Americans are falling way short of having enough savings to retire. In 2022, only 26% of Americans reported having $100,000 or more saved for retirement, while 9% said they had over $500,000. For age groups, the highest percentage is 36%, shared by three ranges: 55 to 59, 60 to 64, and 70 to 74.

All told, less than 40% of the U.S. population has savings at or above $100,000. Previously, we've explained why $100,000 is the magic number that will grow your net worth. In this article, we'll go over a few ways to get you started.

According to Bankrate's 2024 Annual Emergency Savings Report, 29% of Generation Z, 34% of millennials, and 31% of Gen Xers have no emergency savings at all, much less $100,000. However, between these three generations, 29% said they have some emergency savings, just not enough to cover three to five months of expenses.

If nothing else, for these consumers, at least, it tells us there's some income that can be saved and invested toward $100,000 without being forced to live on bread and water. Of course, the only way to get a handle on what you can save each month will require you to figure out what you have left over after the monthly expenses are paid. That means calculating your rent or mortgage, groceries, car payments, credit cards/other loans, and any other necessary life expenses, and deducting that total from your disposable income.

While you may think you don't make enough to save $100,000, consider high earners these days, many of whom are living paycheck to paycheck, and their reasons have less to do with not having disposable income than you would believe. Much of it is due to spending habits. So, regardless of your income, start your road to saving $100,000 by critically looking at your monthly budget and spending habits. Are there any areas you can adjust to save a bit more each month? (On that note, what's the difference between traditional budgeting and zero-based budgeting?)

Once you've figured out your budget, it's time to put your money to work. Instead of parking your money in a traditional savings account, put the power of compound interest to work for you with a high-yield savings account, several of which offer annual percentage yields (APYs) above 5%. We consider HYSAs one of the best places to put extra money, given that traditional savings accounts offer a 0.45% APY on average, per the FDIC. This comparatively low rate is the main reason why traditional savings in the type of savings account that ultimately can hurt your finances.

Aside from high-yield savings accounts, though, another route to consider when building toward your first $100,000 is to take advantage of employer-sponsored accounts; specifically, a 401(k) plan with or without employer-matching. With the employee contribution limit at $23,000 for 2024, by contributing the maximum amount every year, you can save on your own your first $100,000 in four to five years — and this doesn't even include compounded interest. It also doesn't include employer contributions, if your employer offers this as a perk. Note that for 2024, the combined employee-employer contribution is $69,000. Also remember, catch-up contributions for 401(k)s (and IRAs) begin at age 50.