How Much Should I Save for Retirement?

Posted by bpaul as Savings

As retirement years draw to a close, the main questions people ask themselves is “Am I putting enough money away for retirement?” They are usually concerned with whether or not they’ve done enough to help provide for their retirement years, or do they need to start saving more money before it is too late.

retirement

If you’re a woman, your financial needs for retirement may be entirely different than if you’re a man. If you’re married, you need to consider that your husband may not be around when you retire; therefore you will want to factor in that possibility when determining your retirement goals.

When determining the amount of money you’ll need for retirement, you need to first calculate exactly what you’ll need to live on, (which includes personal hobbies, vacation, etc) what bills you will still have to pay each month, how will you pay for health related services,. It has been estimated that retirees will need to maintain approximately 70% to 85% of their current income to live the life they were leading after retirement.

Make a list of everything that you currently owe (mortgage, car payments, insurances, groceries, clothing, utilities, etc.). Don’t forget to factor in at least 3% inflation per year when figuring out what your yearly monetary needs. After deciding on how much money you think you’ll need, you will want to consider when you plan on actually taking retirement. The earlier you plan to retire, the more money you’ll need in your retirement account.

For example, you have estimated that you’ll need $80,000 per year to live on in retirement and will retire at 65. Estimating a 4% withdrawal per year, you would need a minimum of $1,875,000 total retirement account balance. You may decide after you retire that you can do without some luxuries in order to make that money stretch a little further.

Putting money into a savings account is likely a foolish bet, because while it is better than nothing, you will not generate the amount of money you will need to retire comfortably… let alone survive. The way our economy is going Social Security may or may not be available when you reach retirement age, so you’ll want to consider what you can do now. Luckily, there are still options for saving and investing that may help your retirement plan look a little brighter. Currently, I have most of my investment portfolio tied up in mutual funds and real estate.

Bottom Line….stop worrying about “How much money do I need to save for retirement?” and start taking action. If you have a financial planner, make an appointment with them and have them lay you out a retirement plan for you. If not, ask your friends and colleagues for references, or contact your local financial counselor, and they will be probably be able to point you in the right direction.

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