It can be stressful trying to figure out what investment returns, inflation and spending will look like during your retirement years.
Even more so if those years seem to be rapidly approaching…
But regardless of where you are in your retirement timeline, pretty much anybody can benefit from a big picture outlook on the finances of their retirement plan- starting with the most important question of all- how much should you save for retirement.
We’d love to give you an exact dollar amount, but the truth is that figure is heavily influenced by unique aspects of your lifestyle. It’s much more expensive to travel the world in retirement than it is to take up gardening.
So while we can’t give you the exact number, here are some factors to consider.
Your age: The earlier you start saving for retirement, the longer your money has to grow. If you start saving in your 20s, you’ll need to save less each year than if you start saving in your 40s.
Your income: The more money you earn, the more you can afford to save for retirement. But even if your income is small, you can still save for retirement by making changes to your spending habits.
Your lifestyle: The type of lifestyle you want to have in retirement will determine how much you need to save. If you plan to travel or have a large home, you’ll have to save more.
Your financial goals: Do you want to retire early? Do you want to leave a legacy for your children or grandchildren?
It’s also important to find a balance between saving for the future and enjoying life now. If you’re not having any fun, you’re probably saving too much.
But if you’re coming up short, you can do a deep dive into your monthly spending and find some unnecessary expenses to cut out. Take the money you save and add it to your retirement account each month.
In order to save the right amount, figure out your timeline, and do your homework on living and medical expenses. Then, tally up your expected retirement income from savings, pensions and Social Security.
That calculation should give you a ballpark figure of how much you’re going to need for retirement.