How Much Should you be Saving for Retirement?
We all know that preparing for retirement is much easier when you start early, but how much to do really need to be saving in order to retire? This depends on a few different factors such as your retirement age, your current age, how much you currently have saved, the rate of return on your investments and your income level.
Current Age and Retirement Age
Ideally everyone would start saving for retirement in their teens giving yourself 60+ years for your investments to grow. The reality of the matter is that most of us, aren’t able to do that and the older you are when you start saving for retirement the more you may need to save in order to reach your retirement savings goal. A person in their 20’s could save 10-15% of their income every year and still be able to retire at the normal retirement age because their money has had time to grow however, someone in their mid 40’s may need to save 30-40% in order to be able to retire are the normal retirement age.
If 30-40% seems like a lot, it is. There are ways you can significantly decrease the amount you need to save each year by extending your retirement age. You might be surprised the difference delaying your retirement age by just a few years can make.
How much you earn impacts how much you need to save
An important factor to consider is how much you earn now and how much you will need to save each year depending on your expenses and quality of life you would like to maintain once retired. In general, higher income individuals need to save a larger percentage of their income each year than lower earners. Social security benefits may replace a larger chunk of one individual vs. another.
Return on your investments
Another key issue to consider is the rate of return on your investments. By working closely with a qualified advisor (personal CFO) you have the ability to manage your risk and achieve a reasonable rate of return over the long run.
All investment plans and goals are impacted by a number of factors and are unique to you. The KLR Wealth Management team can help you put together an investment plan that will help you reach your retirement goals.