The age old question of retirement planning is "How much money do I need to retire?". The answer to this question is different for everyone because it is dependent on your income, your lifestyle now, and the lifestyle you plan on having in retirement. Many people believe they need over $1 million in their savings to be able to retire, however many people are not on track to hit that savings goal. Retirement planning can be difficult if you do not have a realistic goal in mind and are not on the right track to meet their goals. The last thing you want to happen is to reach age 65 and not be able to retire because you have not saved up enough. Continue reading to learn more about how much you should have saved in your retirement plan.
A rule of thumb for retirement planning is to have your retirement income be 80% of your final pre-retirement salary. For example, if your annual income is $150,000 before retirement, you should plan on an income of $120,000 per year in retirement. If you have any other forms of retirement income such as Social Security or pensions, that can increase your retirement income. You do need to take into account what type of expenses you will have in retirement, including your mortgage or any travel plans you have.
One easy formula to figure out your overall retirement savings goal is the 4% rule. The 4% rule is dividing your preferred yearly retirement income by 4%. For example, if your annual retirement income is $120,000 and you divide it by 4%, your overall retirement savings goal is $3 million. This assumes there is a 5% return on your investments in your retirement savings account, no other retirement income, and a similar lifestyle to what you are living now.
There are also age benchmarks for your savings goals. A suggestion is to have your savings equal to your annual salary at age 30. This normally requires saving 15% of your gross salary starting at age 25. Other age savings benchmarks are at age 40 having two times your annual salary, age 50 having four times your annual salary, and age 60 having six times your annual salary.
The more you can save, the better off you will be in retirement. Retirement savings can be hard but a financial advisor can help ease the burden. By having a financial advisor, you can have advice tailored to your specific situation and goals. By taking your income, expenses, and debt into account, your financial advisor can get you on track to reach your retirement savings goals. Here at Genesis Financial Group, we are here to help. Call today to set up your appointment for reaching your retirement goals!
Sources:
https://www.investopedia.com/retirement/how-much-you-should-have-saved-age/