This is probably the biggest question that you have in your mind today. How much do you need to save for retirement? Some people will give you a rule of thumb on saving for retirement such as 10% of your income. This is called the 10% savings rule. Following such a rule is better than not saving at all. But this rule can not be applied to everyone.
Generally, it is better to save a lot. The more you make, the more that you need to save. This is to prepare you for medicare plans 2020. There is no definite answer to how much amount of money that you need to save for your own retirement. It all ties back on several factors that will influence the amount of money that you need:
- Desired retirement spending
The larger the lifestyle that you want to have in your retirement, the more you will need to save. If you start young and retire later, by consistently saving each month you may be able to achieve a comfortable retirement lifestyle. In a rough calculation, you can estimate at least you need $100,000 for every $5,000 a year retirement income that needs to come from savings. The amount of the calculation is huge, and people can be overwhelmed by it. Work toward making small manageable adjustments that help you save more.
- Current Age
The more you have before your desired retirement age, the less you will need to save each month to reach your goals. If you have less time, you will need to save more.
In addition, if you have more time, you can allocate a larger portion of your investment to higher risk options that have the potential of earning a higher return. If you have less time, then you need to allocate more toward safer investments.
- Projected retirement age
When the idea of retirement first started, people did not live as long as they do today. With improved healthcare, you may live for 25 to 35 years in retirement. That will require you to build a hefty nest egg. Many people are going to be better off working longer, at least until the age of 70. This means you can delay your social security benefits and get a larger amount of guaranteed income from your social security at age 70.
- Existing savings
If you have inherited money or already have a decent amount saved in your IRA, then you may have a good start on saving for retirement already. If you have a home or business, be cautious about how much of that assets you count as being available for retirement. This means that if you are planning to buy a new house for your retirement, then you might have to calculate more.
If you are starting from scratch and you do not have any current savings, then you should think about some non-traditional approach to retirement savings such as renting out a room in your home or retiring overseas.