Thinking about your future can be scary when you feel unprepared financially. If you don't have money saved or fear you may run out, you might be one of the millions of Americans every year who is afraid to retire. Fear is stifling, and a recent study supports 42% of Americans fear they will be unable to meet the basic financial needs of their household should they retire.
If you can relate or you are on other end and preparing for your financial future but have asked yourself 'how much should I save for retirement' this is for you. We're here to help you determine just what you need to stash away to maintain your quality of life post-retirement.
How Much Should I Save For Retirement?
This is a great question, and the answer is simple. Save as much as you can. Asking the question, 'how much should I save for retirement' can mean something entirely different depending on your age and current financial portfolio. Regardless, begin now by saving 15% and make monthly contributions, every time you get paid.
Factors That May Impact Your Retirement Needs
People are living longer and healthier lives than in the past. Seniors are working at older ages, not because they have to, but they are still enjoying a vibrant life. They are engaging in fulfilling activities longer, which may come with a price tag. Depending on your health status and family history, you may well live into your 90s. Simply put, the longer you live, the more money you will need.
As we mentioned, and in line with many financial professionals it is suggested you save a percentage of your regular paychecks ranging from 10-15% for your retirement. While this is a great starting point, your circumstances meaning your income, expenses, health and current living standards will greatly impact what you will potentially require in the future to maintain a similar quality of life. For that, we suggest you be more specific.
Set A Target Goal Amount
Instead of using a percentage, you could come from the perspective of determining how much you would like to live on, based on the quality of life you desire for yourself. Considering factors such as your retirement location, age and the activities you hope to enjoy, you can use an online calculator to estimate approximately how much you should save. Armed with this number, you can work backward as you set aside monthly contributions.
When Should I Start Saving For Retirement?
How Much Should I Save For Retirement By 30
The sooner you start, the better! Most articles and financial planners will tell you to begin saving in your 20s or earlier if you want the best possible savings outcome. That's fine and dandy, if you're still in your twenties. We understand that many of our readers are not, in fact, in their twenties, so we'll give you a few different scenarios that should match up with your current age bracket.
By the time you reach the age of 30, you want to have 1/2-1X your annual salary saved in your retirement account. If you earn $$ per year and have been working for a few years, you should have an amount ranging between $ to $$$ in your account.
How Much Should I Save For Retirement By 40?
If you've turned 40 years old, you should be looking at a nest egg that has reached 2x your annual salary. Using the same $$ annual income, you should now have $$$ in your retirement account.
How Much Should I Save For Retirement By 50?
When you reach the prime age of 50 years young, this is when many people get worried. They look at their financial portfolio and realize they do not have the recommended 4x your annual salary growing in an account. This is the time to face your fears and get started saving!
Is 60 Too Late To Begin Saving For Retirement?
While it is not advisable to wait until you're 60 years old to begin saving for retirement, the most optimistic way we can look at it is 'better late than never.' Yes, starting at this age presents challenges, but it is not impossible to overcome. You will definitely have to be creative, frugal and willing to work and save.
What If I Cannot Save Enough?
Don't lose hope if you haven't saved enough for retirement. If you are truly willing to make a go at this, you have options. Investments are unpredictable, but you have to ask yourself if it is worth the risk. Have you considered cutting back on your personal expenses?
Downsizing your house and possibly selling a vehicle, if you have more than one, are viable options for reducing how much money leaves your account. These decisions can be tough, but when your future life is at stake, this is what you must consider.
What If I’m Running Out Of Time?
If you feel that you're running out of time, you'd serve yourself better by focusing on how you can maximize what you currently have available. If your employer offers a 401K program, are you maxing out the possible $$ annual contribution? It's better to put it in a tax shelter than to spend it on new clothes or have it eaten up by the IRS in taxes. If your health is good, you may want to continue working a few more years, until you can build a nest egg.
Options To Increase Your Savings
Today there are more viable options for earning extra cash if you desire. Taking on odd jobs like driving Uber is one suggestion that can add to your bottom line. Creating a snowball spreadsheet to pay off your debt by priority is another avenue. Cutting back on your current expenses goes without saying.
Where Should I Save My Retirement Money?
Choosing the best place to put your retirement money could be the key to boosting your savings.
Contribute To Your Employer 401K
Any money you contribute to this tax shelter is pre-tax. What that means for you is you won't pay the IRS for it until you take it out in your senior years. This can work in your favor because this money is deducted from your paycheck before federal taxes are applied to your pay. Plus, as you age, chances are you will be in a lower tax bracket which means when you use the funds you will be taxed at a lower rate. With an employer match, your contributions will double.
Open An IRA Account
Whether you choose a Traditional or Roth IRA, this is a valuable consideration that will hold and grow your money for the future. These retirement accounts are both tax-deductible and have the benefit of growing your nest egg. Be advised, the contribution limits for an IRA are much lower than that of a 401K, so if you are in a position to have both, it could definitely help you save more and faster.
Can An Online Calculator Help Determine How Much I Should Save For Retirement?
Accessing an online financial calculator is a great way to gain perspective on how much you will need in the future to sustain your desired quality of life, and thus how much you should save today. Most financial investment companies offer free calculators that will take into consideration a range of factors related to your financial position. Your desired city or state of residence, current income, monthly savings, and expenses are just a few bits of necessary information.
When Can I Retire?
For all intents and purposes, the Social Security Department allows you to access benefits as early as 62 years old. Others list, 65-67 years as retirement age. However, determining when you can retire is based on how you have prepared yourself financially. Do you have adequate savings to sustain your lifestyle? Do others depend on you for regular financial assistance? What is your level of debt? These are the type of questions you want to ask yourself before deciding to retire.
Planning Tips For Retirement
No matter how old you are, if you're pondering the answers to the question, 'how much should I save for retirement?' you're in the best possible place you can be right now. You've taken the first step to make a change for a better financial future. There's no point in stressing about 'shoulda, woulda, couldas' of the past.
Now is the time to buckle down and make the disciplined decisions that will impact your quality of life and anyone who is relying on you. Take charge and move forward with enthusiasm into your financial future!