Practical Advice On How Much To Save For Retirement
The first question you ask yourself after you’ve hit the snooze button several times on your alarm clock is probably not how much should I save for retirement. When you are running late for work, your retirement savings plan is usually not a priority; getting to work is.
Asking yourself how much do I need to retire is more than a question, it’s a philosophy. If you ever hope to retire someday you need to make saving for retirement more than just a question you ask yourself once in a while when you are tired of working, need a change or can’t stand your boss. How much money do I need to retire is a question you need to continually ask yourself from your first job until your last one.
Why Are Average Retirement Savings Levels So Bad?
The average retirement savings rate in the United States is dismal. There are many reasons for that. One, people just do not know how much to save for retirement. Two, folks are living beyond their means, raising their debt levels resulting in little money leftover for saving. Three, individuals are unwilling to make short-term financial sacrifices for the long-term benefits of a decent retirement.
How Much Money Do You Need To Retire?
How much you need to retire of course is a personal matter; it all depends upon when you plan to retire and what you plan on doing once you have retired. With that said, there are 2 financial calculations which can help determine if you are on track. Due to inflation, percentages are more helpful than hard dollars.
#1 – The Percentage of Your Salary
You cannot go wrong if you consistently save 10% of every paycheck throughout your entire working life. Is that feasible for you? You won’t know unless you try. Make the commitment to save 10% but allow yourself a bit of flexibility during any financial bumps that come your way. And the financial bumps will come, we all get them, ease up on your savings but do not discontinue saving altogether.
#2 – The Percentage Of Your Pre-Retirement Income
Financial experts will tell you that you will need 75 – 80% of pre-retirement income to live a comfortable retirement. Is that true for you? Do some homework; ask yourself the hard financial questions. How much do you need to retire depends upon your financial needs. Will your mortgage be paid off? Will you still have a car payment? What will your health insurance costs be? Will you start new, expensive hobbies? Lots of questions that only you can truly answer.
No one cares as much about your retirement as you do. Your retirement will be the second phase of your life someday so do not wait to plan for it. Make retirement planning a philosophy that you follow throughout your entire working life.