If you want to live comfortably during retirement, it pays to start planning at the earliest opportunity—and for many, setting a reasonable savings target is a challenge in its own right. How much do you need to retire without compromising your goals or way of life? The truth is that there isn't a one-size-fits-all answer to this question; it all depends on the intentions that you've set for your golden years.
With that said, most experts agree that savings of 10 to 15 times your annual income will be sufficient to help you weather any storm. In order to reach this goal, it's important to set clear milestones for yourself, and to develop an understanding of the factors that can impact your rate of savings.
How to Save for Retirement
Set Your IntentionsSome retirees want to plan extensive vacations with their loved ones. Others plan to focus on their favorite hobbies, or to spend the days at home with grandkids and family. It's important to have a clear idea of how you want to spend your retirement—and to adjust your savings goals accordingly.
Check Your Progress Against MilestonesSaving 10 to 15 times your annual income is no easy task, but it becomes much easier when you break it down into smaller, more manageable steps. Most experts recommend that you save the equivalent of your annual income by the time you reach age 30. From there, you should aim to save roughly three times your annual income by age 40. After this point, you should aim to double your savings each decade.
Depending on where you start from, saving roughly 15% of your income each month is the best way to set yourself up for success—assuming that you continue to invest a significant portion of the money that you save. It's also worth noting that, during retirement, you may receive money from multiple sources. It's unlikely that you'll have to rely on savings alone. However, your savings will determine how much freedom you have during your final years.
Consider Your Cost of LivingDo you intend to maintain your current standard of living, or are there sacrifices that you'd be willing to make? Most retirees move to more affordable areas in the years that follow the end of their careers, but also face rising healthcare costs as time goes on.
No matter what your next steps are, our pre-retirement checklist can help you move forward with confidence.
Retirement Savings: Factors to Consider
- Rate of Return on Investments: Most retirement calculators assume that you'll receive a return of roughly 6% on your investments every year. However, this rate can vary depending on multiple factors, including the investment strategy that you adopt. Work with an advisor to determine the most sensible path toward your goals.
- Rate of Inflation: For the past 50 years, inflation has tended to remain below 4% per year. Most retirement savings plans assume that the rate of inflation will remain more or less constant—but as we've seen over the past year, accelerated inflation is a real risk. It may be worth it to pad your savings plan in order to ward off the impact of a rising cost of living.
- Age of Retirement & Post-Retirement Work: Most retirement savings plans assume that you'll spend roughly 20 to 30 years in retirement, and that you'll retire at or around age 67. But what if you want to retire early? What if you plan to embark on a second, post-retirement career? Each of these decisions can have a major impact on how much you need to save prior to retirement.
IntentGen is Here for You
Securing a comfortable retirement is one of the most significant challenges that you'll face during your working years, but you don't have to assume that you're in this alone. Our team of advisors is here to help you make the most of your retirement, whether you're coming from behind or you're starting from a place of strength. Contact us today to learn more about what we can do for you.
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