Everyone has an idea of what their retirement will look like, which can be as simple as sleeping all day or enjoying a sunny beach. Living in comfort during your retirement means that you must have enough money to support your lifestyle. In order for this to happen, you must start saving early. Most people keep asking how much they should save for retirement.
In this review, we shall give you a simple savings plan that will work for you, regardless of what you decide to do when you retire. Now, the simple rule is to save 15% of your pre-tax income each year, assuming that you will retire at around 67-70 years old. When you start as early as around 25 years old, you will have amassed a considerable amount of wealth for you to retire in comfort.
According to research, most people usually need between 55 – 80% of their pre-retirement income in order to maintain a healthy lifestyle upon retirement. Now, do not worry, all of this money will not necessarily come from your own paychecks. If you can get social security, that will help you as well.
Is 15% Really Enough?
This depends solely on the choices you make before and after retirement. Mostly when you start saving early, you can have enough put aside for you to enjoy a great life. You should also consider other sources of income such as your pension and your portfolio earnings. It is better to have too much than not enough when it comes to retirement.
Here’s A Simple Plan
In order to help you save for your retirement, check out our helpful tips. Keep these things in mind as you begin to set aside money for your future.
Start Saving Early
As mentioned earlier, if you start saving as early as 25, then you will have a solid and concrete plan in place by the time you retire. You may think that 25 is too early, but it isn’t. This is the year that most people get their first jobs, and this means that you will have an income. Life moves fast, and before you know it, you will be 50 and looking at retirement in just a few years. You must be pro-active and responsible enough to understand this.
Delay Your Retirement
Most people retire around 67, but who says that you must retire then as well? Ruth Bader Ginsburg is 90 and still working, in one of the most important positions in the country no less. Though you do not have to keep working as much as her, you can delay your retirement by five or 10 years if you are still strong enough and if your company allows it. This ensures that you have some more time to plan accordingly for your retirement.
Make the most of tax advantages for accounts such as 401(K)s, and ROTH IRAs. These contributions are made before tax and, as such, reduce your taxable income. This money can also grow tax-free until you are ready to withdraw it during retirement.
Increase Your Savings
If you have some extra money in your savings, and you have room to increase your IRA and 401(k) contributions, then go for it. This will get you to your annual contribution faster and increases your chances of having more money during retirement. Really, the more money you can save the better.
Catch Up With Your Contributions
If you are already 50 years old, then you must ensure to keep all of your contributions up-to-date, especially your retirement savings. As of 2019, any employees that were 50 years and over were allowed to contribute an extra $6,000 dollars over their $19,000 limits. This is excellent for them because they are nearing retirement.
Expand Your Portfolio
You must make considerable investments so you can have a high chance of increasing the returns. You must also be extremely careful and not take too many risks as this could lead to a loss of all of your savings. Using an investment firm to secure your savings is an excellent idea. You shall be in a better position to save for your retirement when you work with a professional. There are some reputable investment firms that can help you come up with an excellent retirement portfolio that will mature when you stop working.
Most insurance companies will offer you a retirement plan as well, where you can save some money and earn interest on it. This money comes into maturity at the time you retire. At this time, you can choose to withdraw a little at a time or to receive the money as a lump sum.
When it comes to retirement, savings has to become a priority. It’s not a choice. You must keep some money aside that will help you live the kind of life you wish to live when you retire. Retirement means that you may need to move into a new house, care for your medical bills, and take care of your everyday expenses.