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How Much Do You Have To Save For Retirement? Here’s How To Find Out

How Much Do You Have to Save for Retirement? Here’s how to find out

Whether you’re sunbathing on a quiet beach or sipping champagne in your prime seat to a destination far away, you’re likely looking forward to a well-deserved break after a life of hard work.

But figuring out how much to save for retirement can be as stressful as making the money. And once you have a grand total in mind, actually reaching that savings goal can be overwhelming.

Financial professionals offer some well-worn guidelines and rules of thumb that can help you turn your ideal nest egg into a reality. However, the exact amount you need to save during early retirement depends on your personal financial landscape – and how you want that landscape to look across the board.

Here’s how much you need to save for retirement, regardless of age, income level, or goals for the golden years.

Rules of thumb for retirement planning … and when to break them

Maybe 15%

In general, financial experts recommend saving around 15% of your income for retirement. (That’s in pre-tax dollars by the way, which means it’ll be a significant part of your paycheck.)

Let’s say you’re a freshman college grad and you’ve just got your first real job and earned a salary of $ 35,000. The rules say you should keep $ 5,250 for the future, most likely on a company-sponsored 401 (k) plan.

But … maybe more

If you start saving later than sooner, that percentage will go up to make up for the lost time you could have made from compound interest.

Perhaps you’ve just celebrated your 35th birthday and realized that it is time to get serious about this retirement plan. If you haven’t started working on your nest egg, you are in good, or at least abundant, company:

About one in five Americans has saved absolutely nothing for retirement. However, experts suggest saving 23% of your income, a significant increase over the 15% of those 20s.

But here is why these rules may not apply

However, a percentage rule of thumb can only go so far. Your actual retirement needs will vary as follows:

  • Age
  • Income level
  • What should your retirement income look like?

In addition, today’s retirement goals are very different from those in the past. Retirement, once a common perk in the workplace, is all but extinct and many of us have far more debt in our lifespan.

Malik S. Lee, a certified financial planner and founder of Atlanta-based Felton & Peel Wealth Management, is skeptical of old-guard proposals for retirement. “To be honest, I think it’s a thing of the past to save old rules of thumb like 15 or 20 times your salary,” he says.

Instead, he says, it’s all about planning to figure out how much you need to save for retirement. And, whether you hire professional help or do your own handicraft, that means you have some homework to do.

How Much Money Should You Have in Retirement?

Ababsolutum / Getty Images

It would be nice to have a simple guideline on how much 30, 40, or 50 to save for retirement.

The truth, however, is that the question, “How much should I save?” Can’t answer until you answer this question: How much do you plan to spend?

Your specific retirement goal depends on how you want to live there.

Want a humble retirement – a simple life where you work on hobbies and passions at home? Or are you planning to spend your golden years in style, jet setting, and all those epic vacations that you didn’t have time for during your prime?

If you are looking to retire with an income of $ 100,000 per year, your calculation will look vastly different than if you had an income requirement of just $ 35,000.

Start with this very important question

The very first thing to do before you even touch this retirement calculator is to sit down and figure out how much you can spend during your retirement. Don’t forget to include regular expenses like accommodation and food, as well as long-term plans for fun but expensive adventures.

You also need to multiply the annual expenses by the number of years you think you will need that income. (Yes, this means you need to guess your own death date. Yes, it’s a bit morbid.)

Once you have a good idea of ​​how much your retirement will cost, you can move on to the next step.

How Much Should I Save Each Month for Retirement?

Now that you know exactly how much you will need to fund your dream retirement, the question remains, how much do you need to save to get there?

The easiest way to find out exactly how much to keep is to use a retirement calculator, like this one from Bankrate.

You simply fill in information like your age, income level, existing pension holdings and contributions, and most importantly, how much income you will need in retirement, usually expressed as a percentage of your current income.

The calculator will then show you how far you are getting with your current saving efforts and give you an idea of ​​how much more you will need to save to meet your goals.

Do the math, but keep these points in mind

The calculator may (or may not) include social security benefits as part of your planned retirement income, as there is speculation about whether these benefits will at least continue at their current levels. You can decide for yourself whether you want to include social security as an annual source of income.

Don’t forget that this equation will change over time. Over the course of your life, you’ll (hopefully) earn raises and collect a nice pile of savings. You can also change your retirement plan and decide that you need more or less income when you get there. So check your retirement savings calculation often.

How to achieve your retirement goals

A woman kicks water into the air on the beach at sunset.
Peggy Peattie for The Penny Hoarder

So you have reached your destination and you know how much you need to save to get there.

Now comes the really hard part: actually doing it.

Depending on how long you plan to live after retirement, and how much you plan to spend then, you could aim for a savings goal of a million dollars … or even higher. You have the best chance of hitting this sum if you start saving for retirement as soon as possible – ideally as soon as you are making an income.

However, thanks to the power of compound interest, these sky-high goals are not impossible to achieve. When you let the stock market do its magic, even modest savings can pile up into a serious nest egg if given enough time.

401 (k) savings

If you work for a company that offers one as part of their benefit package, your 401 (k) account is likely your best retirement vehicle.

As for retirement accounts, it’s an ace: the 401 (k) has high contribution limits, gives you a tax break today, and if you’re lucky, you might even benefit from an employers match, which means free money.

Options for self-employment

But if you’re wondering how to save for retirement without a 401 (k) (hello freelancers – trust me, I feel you), you still have options.

Figuring out how to save for retirement as a self-employed person is a little more complicated, but that doesn’t make it impossible. You can open an individual retirement account, e.g. B. a Roth IRA (taxed today) or a traditional IRA (tax deferred).

Although they have contribution limits significantly lower than $ 401 (k) – $ 6,000 for 2019 or $ 7,000 including catch-up contributions for savers over 50), IRAs still give you access to compound interest.

If you’re a solo preneur or small business owner, you can also consider a SEP IRA (for small business owners) or Solo 401 (k) (for business owners without employees), which have higher contribution limits and can help you reach your retirement goals faster.

Regardless of your income level or your retirement plans, the number one rule for retirement planning is: just do it! While starting young is ideal, working towards your nest egg is a worthy financial goal at any age – and when the golden years come, all savings are better than none.

Whether or not you achieve your ideal retirement savings, your future self will thank you for your efforts.

Jamie Cattanach’s work has been featured at Fodor, Yahoo, Self, HuffPost, The Motley Fool, Roads & Kingdoms, and other outlets. Learn more at

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