How Much Should I Save For Retirement || Exact Retirement Calculation || Saving For Retirement
How Much Should I Save For Retirement
How Much Should I Save For Retirement? Great question! If you have found yourself reading this blog or watching the YouTube video, “How Much Should I Save For Retirement’” you are probably asking that very question. Well, let me help you with the answer.
It depends.
Real scientific right? Well, not really. Each individual person and family has a different retirement journey. Everyone has different retirement needs, wants, and goals. Those specific retirement needs, retirement wants, and retirement goals will determine how much you need to save for retirement.
So, how do you calculate how much you need to save for retirement? Another great question!
Here is a simple way to calculate how much you will need for retirement (You can use pencil and paper or computer spreadsheet):
- Add up all your current expenses and expenses that you will continue to have in retirement. For example, if you stream cable through YouTube TV and you plan on continuing that service in retirement, that would be considered a retirement expense. BUT, if you currently have a mortgage on your house, but plan to have that paid off or move in retirement, that expense can be left out of the column.
- Next, calculate all your sources of income in retirement and put that in a column next to your expenses. For example, social security, pensions, income from retirement savings and retirement investments, dividends, rental property, and any other passive income source.
- Finally, take your income and subtract out your expenses. If you have a positive number after doing your retirement calculation, you are moving in the right direction. If you come up with a negative number after doing your retirement calculation, then more retirement income planning is needed.
Now, back to your original question, How Much Should I Save For Retirement. We have calculated your expected retirement income so now we need to use that retirement income figure to help figure out how much to save for retirement.
A good rule of thumb is to save 10-15% of your current gross salary. If you make $100,000, you want to save $10,000-$15,000 annually in your 401k, IRA, or other retirement accounts. If you are 40 years old and you save $15,000 for 25 years, with 6% market growth, you will have $887,345 at age 65.
If you do your calculation and find that you need more retirement assets in retirement than you are currently saving, then begin saving more. The younger you start, the easier it will be to attain the retirement investments and retirement income that you desire. If you are nearing retirement, there are certain catch-up provisions that the IRS allows in your 401k or IRA that will allow you to save more for retirement later in your working years.
How much you should save for retirement is personal. Yes, there is a little bit of work you need to do in order to find the amount of retirement investments you need. If you are young, start saving for retirement now. Just blink and you’ll be 65. If you are older and seeing retirement on the horizon, make sure you have put together a retirement income plan and retirement investment strategy that will get you to retirement, through retirement, and protect your ability to STAY in retirement.
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