How Much Should You Save for Retirement?

Written by on August 27, 2012 in Money - No comments | Print this page

|

It could be difficult to calculate how much money will be needed during retirement since there are many things to consider based on personal finances and conditions. However, the younger you start planning for retirement with proper saving and investment accounts, the better prepared you’ll be to live a comfortable retired life. To know how much money you’ll need for retirement, several factors must be considered such as income, social security benefits, pensions, investments, retirement age, and desired lifestyle.

Earnings

Your current earnings are key to calculate your retirement savings. Based on inflation projections for the time of your retirement, life expectancy, and return on retirement accounts, you could calculate how much money you’ll need. Create a proper budget to manage your income and expenses on a monthly basis. In addition, place as much money as possible after expenses on retirement plans based on such budget.

Social Security and Specific Pension Benefits

Social Security payments must be made after retirement, which can substantially reduce your income amounts. Consider if you’ll be getting Social Security or specific pension payments to know how much tax you’ll be paying, if any. Consider the lifestyle that you want and save accordingly.

 

Investments

Make an investment plan based on your goals, age, expenses, and personal income.  Here are the main things to consider about retirement accounts:

  1. Don’t tap into retirement plans early. In case you need to make a large purchase such as a home, you might be tempted to use money from retirement funds. This should be avoided since you will lower the money available for retirement and taxes will be imposed for withdrawing money earlier than planned.
  2. Contribute regularly. Create a habit of constantly adding funds to your retirement investment accounts. If possible, set up contributions by using jobs’ programs for automatic paycheck transfers.
  3. Use employment options.  If your employer has sponsored based retirement plans, use them. Getting employer-matching contributions for your retirement accounts is just like getting money free.

Retirement Age

The earlier you retire, the more years you will live under retirement. As such, you will need more money based on how early you retire to cover for the extra years. By waiting longer to retire, you may be able to work and save more.

Retirement Lifestyle

You must consider the kind of lifestyle that you plan to have during your retirement years. Do you plan to take vacations to exotic locations or undertake expensive events? Will you buy all the latest gadgets? Will you have the same or more expenses in comparison to what you spend now? These are all important questions to consider in order to understand your specific retirement needs.

The money that you will need for this big life changing event is affected by many personal factors. Due to this, there isn’t a right answer to know the exact amount needed for retirement. However, by planning and saving at the earliest, you can better prepare for those golden years. Make the highest possible contributions to your retirement saving accounts without hurting your finances to have a comfortable retired lifestyle.

This is a guest post.  This article is provided courtesy of CreditSeason.com, a consumer finance website providing information and tools on bad credit loans and other personal credit services.

Image by photostock: FreeDigitalPhotos.net

|

About the Author

Guest Blogger

This article was written by a guest contributor. You will find their details at the bottom of the post. To submit your own Guest Post to our website, please visit our SUBMIT page for details about adding your article.