How Much Should I Save for Retirement?
There are various rumors about how much you should save until retirement. One rumor says that you need to save 12 times your pre-retirement salary, another around 1 million dollars, another rumor says that you need to save 85% of your annual salary before retirement. Which is right for you, pension experts have determined how much you need to retire. In the light of the information in this article, you will be able to determine whether your retirement plan is on the right track and change the things you do wrong.
It is a fact that pension experts and researchers cannot agree on a total amount. Because everyone’s needs and lifestyle are different. Retirement needs can turn into a long list when sorted.
- Your sources of income in retirement
- How long will you live on average based on your family history
- Your health status
- Your current age
- The age at which you plan to retire
- Age at which you may be forced to retire for job loss or other reasons
- How much do you plan to spend in retirement
All these factors will help you determine the amount of savings you will make for retirement. Even if you make a generous note of the expenses you will make in your retirement life, this money may be missing when calculating the money required for your retirement. The size of the amount you save and how long it will last you after retirement depends entirely on how you spend it.
How Much Will You Spend in Your Retirement?
Your lifestyle and what you want to do in your retirement years will be the deciding factors for you. You may have discretionary expenses. If you want to do expensive hobbies, travel, entertainment and so on, you will need to save a lot of money. On average, 46% of your income in retirement goes to housing expenses, 13% to food expenses, 11% to health expenses, 3% to clothing expenses, 12% to transportation expenses, 8% to entertainment expenses, and 4% to other expenses. These rates are based on data from the Employee Benefits Research Institute (EBRI).
Although retirement will increase the health needs and costs due to being at an advanced age, it will naturally reduce the costs of needs such as entertainment. Retirees spend more time at home. They can also live at a lower cost as they acquire hobbies such as cooking at home and growing plants in the garden.
When using the retirement income calculator, you can add any income sources that can help you meet your retirement expenses. US citizens have Social Security as the largest component of their retirement savings. Inheritance, income from the sale of your business or home, pension, retirement accounts, annuities and rental income are resources that will help you throughout your retirement.
Working in Retirement
If you are saving less and investing less today by risking working in retirement, we recommend that you reconsider this. Because working in retirement is really difficult and undesirable. According to a study by EBRI, 73% of people plan to work in retirement, while 30% of retirees report that they are working in retirement.
With the retirement calculator, you should calculate how much money you need to withdraw from your savings each year in retirement. Because where your pension is not enough, you have to withdraw money from your savings. According to one calculation method, people should save 1.4 times their last annual salary before retirement as retirement savings. In this way, they can achieve the same living standards throughout their retirement.
The Merill Personal Pension Calculator allows you to determine where you are on the road by correlating what you will need when you retire and your current savings. In this calculator, you can choose your investments, set a savings target and select your possible retirement date. These calculators can show that you’re behind where you should be, or even show that you need to save more than you ever imagined. An investment can be the magic ingredient that will earn you many times over in the future.
An aggressive formula calculation also tells you that you should save 25% of your gross salary every year, starting in your 20s. No matter how much you’re saving, you shouldn’t stress out financially worrying that you’re not saving enough for retirement. While every person can save a lot in one period of his life, he may not save at all in another period. Just try to get closer to your goal and check your progress from time to time. Saving for retirement is really important.