Your retirement goals aren’t like anyone else’s, but you can still use guidelines to help find the right plan.We all know that saving is important, whether we’re just starting out or growing close to retirement age.
What a lot of us don’t know is “how much do I need for retirement.” Is my plan for retirement is on par with others who have a solid plan and stick to it. Will I have enough?
Most financial advisors recommend starting early and saving 10 percent of your earnings. And while that’s better than not saving at all, it doesn’t tell you much about where you should be at different stages of the game. Whether you’re 35, 55, or looking retirement square in the eye, here are a few benchmarks for comparison.
How Much Do I Need to Retire? Calculate Based on Current Earnings
Although there are a lot of variables involved, most financial planners agree on the percentages theory, at least as a guideline. Using percentages, we can better understand what we should be saving at what age, or how much we should already have squirreled away for the future.
- By the time you reach age 35, Time magazine recommends that you have an amount in savings that matches your annual salary.
- But it gets steeper from there. When you’re 45, you should have three times your annual earnings.
- And by age 55, it increases to five times your earnings. When you reach 67, you’ll need eight times your annual earnings in retirement savings.
Now is the time to decide whether to aim high or choose a modest retirement.How Much Do I Need to Retire? Consider Your Desired Lifestyle
Of course with guidelines also come variables. While saving at the recommended rate can put you on a good path toward a comfortable retirement, the lifestyle that you’ll want to lead also determines what you’ll need.
If you plan to retire modestly, modest savings might be adequate. Lifestyle plays an important role in retirement planning. Business Insider shows a sliding scale that increases the more than you earn. Using their theory, a 45-year-old who earns $50,000 annually needs 1.6 times her earnings in savings, while someone the same age who earns $400,000 annually needs 6 times her salary.
A retirement planner could help you personalize your savings goals.
How Much Do I Need to Retire? Increase Your Savings Every Year and Watch Investment Returns
How much you set aside is only eclipsed in importance by the rate of return on what you save. Time magazine says to start saving 6 percent of your pay, then increase it one percentage point annually until you’ve reached 12 percent. That’s 2 percent higher than the usual recommended 10, but it also lets you build up gradually.
Also, your employer sponsored plan should match you at least 50 cents for every dollar that you save, up to 6 percent. You’ll aim for a rate of about 5.5 percent growth annually, which keeps you ahead of the rate of inflation.
Your plan for retirement doesn’t have to be an overwhelming array of monitoring the market, trading stocks, moving money around into better and better investments, and essentially living your life around every penny earned and saved. But you can probably improve on what you’re doing now.
How Much Do I Need to Retire? Use a Retirement Calculator to Find Out
NewRetirement can help you make sense of the sometimes confusing business of saving for your future. Start by getting a quick assessment using our retirement calculator.
You’ll spot any areas where your plan needs improvement, and find out how to adjust and find a pace that works for you. You don’t have to be a financial guru; you only have to find your path and then stick with it.
