One hundred thousand, one million or one billion – how much should you save for retirement? Instead of drawing a random number from a hat, use tips from financial planners to prepare for your future.
Write Down Retirement Goals
Do you want to travel the world or move closer to your children after you retire? Maybe you anticipate needing long-term medical care or providing for a disabled child. These goals determine how much retirement money you need to save.
With your goals in mind, calculate your retirement expenses. Figure in cost of living differences if you plan to relocate, and remember that while you won’t have commuting costs, you may experience higher medical costs.
Social Security, pension funds and IRA withdraws are three possible income sources you’ll receive during retirement. Use the annual letter you receive from Social Security and your pension and retirement fund reports to calculate your income from these sources.
Set a Target Amount to Save
Now that you’ve outlined expenses and income, you’re ready to decide how much money you need to invest. In general, you need to save $20 now for each dollar your retirement expenses exceed your income. So if your expected retirement expenses exceed your projected income by $20,000 a year, you need to save $400,000 in your nest egg.
Your financial planner, human resources manager this online calculator can assist you in tabulating how much money you’ll need to retire comfortably. Recalculate this figure annually to make sure you’re on track to save your target amount.
Instead of guessing at how much money you need for retirement, use these tips to create a realistic plan. You can also save 10 to 15 percent of each paycheck, or more if you’re older than 30, to give your money time to grow into a healthy nest egg. Consider adding any raises or bonuses to your employer sponsored retirement accounts, too, as you prepare for your future.