How Much Do I Need to Save for Retirement? - Being aware of how much you need to save for retirement is extremely important information to have for your well being. Even if you’re a young professional, just starting your career– the earlier you begin planning and saving for your retirement the better off you will be. It may sound crazy to begin saving now when retiring seems so far away but once you understand how much you need to save for retirement, it will sound like a much better idea.
How much do I need to save for retirement?
The amount may shock you.
On average, you need to plan on spending 60-100% of your pre-retirement income each year of your retirement. That’s a lot!
For example: A retiree made $50,000 a year before retiring at the age of 65. Anticipating that they will live another 15 years, they decide to put aside enough so there’s about 80% of their pre-retirement income to spend annually.
80% of $50,000 = $40,000 x 15 years = $600,000 needed for retirement!
There are many costs to anticipate when retiring — living expenses, food, travel, helping family and sadly illnesses. Most people also change their lifestyles when retiring to live more inexpensively. Selling your house to move into a smaller space is one way to cut down on costs, as well as living abroad in cheaper locations.
You need to be realistic about what lifestyle you want to lead, what things you will have paid off (retiring with debt is a terrible idea) and once you have the numbers you can work back and see how much you really need to save.
Anticipating the future is the best way to deal with retirement costs. Here are some tips:
1) Calculate how much money you will need to retire. All you need to know is the average annual income you anticipate in your career until you retire, calculate 60-100% of that amount and then multiply it by the number of years you think you’ll live after you retire. A little morbid, admittedly, but good planning nonetheless.
2) Opening a savings account at your bank.
3) Begin putting money away. The best way to do this is to plan on putting away a certain percentage of every paycheck you receive in your retirement fund. Also, any extra money you may receive (tax returns, bonuses, etc) and don’t need at the moment plan on putting into the retirement fund.
Remember that good planning can help you tons in the future. You want to enjoy your retirement years and not have to spend them worrying about money.
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