There’s plenty of information out there about how to save for retirement, but not nearly as much on how much you should be saving.
Like any other major life event, it’s important to do your research beforehand and avoid the whole “shot in the dark” approach.
That’s why I’ve listed some helpful guidelines on how much money you should set aside prior to reaching that long-awaited retirement date.
So, for the big question… How much money does it take to comfortably retire?
Although there’s no one-size-fits-all budget for preparing for retirement, financial professionals agree that you need about 70 to 90 percent of your current income each year.
Social security payouts, investment returns, savings and whatever other revenue sources you’ve accumulated over the years can all be included in this value.
Just keep in mind that fewer resources require you to dip into your savings more heavily, which is why it’s a good idea to estimate your retirement income needs.
Before you determine this value, take loans and mortgage payouts out of the equation, and any other recurring charges that may not be relevant during retirement. At the same time, expect to see your healthcare expenses significantly rise…
Just to give you an idea, the cost of Medicare premiums for a healthy retiree couple averages somewhere in the ballpark of $250,000!
While you may be free from some of the monthly payments you’re dealing with now, these healthcare costs will unfortunately make up for this during retirement.
So, how exactly do you determine the “how much” factor…
An easy way to figure out what kind of money you need to set aside each year is to add up all of your expected retirement income sources and subtract them from your estimated retirement needs.
The difference between these two values serves as an approximation of the kind of cash you’ll need each year.
With that said, be realistic about saving. Don’t get too caught up with pinching pennies and saving for retirement to the point where you forget to enjoy life.
Then again, the earlier you start to save, the easier it’ll be for you to prep for retirement in the long-run.
Don’t aimlessly enter into this new chapter of your life!
There are countless tricks in the book on how to save for the future, but not many on how much to actually set aside.
Keep this 70 to 90 percent range in mind as you plan ahead and give yourself a rough idea of the kind of money you’ll need to save in order to enjoy the retirement you deserve.