Saving for retirement is one of the most important financial goals a person can have. With longer life expectancies and the uncertainty of future social security benefits, it’s crucial to start saving early and consistently for your golden years. But how much should you save for retirement?
There is no one-size-fits-all answer to this question, as the amount you should save for retirement depends on several factors, including your current age, desired retirement age, expected lifestyle in retirement, and current income.
A common rule of thumb is to aim to replace 70-80% of your pre-retirement income during retirement. This means if you are earning $50,000 a year before retiring, you should aim to have $35,000-$40,000 in annual retirement income. This can come from a combination of sources, including social security, pension benefits, and personal savings.
To determine how much you need to save, consider using a retirement calculator to estimate your retirement expenses and income. Be sure to take into account factors such as inflation, healthcare expenses, and potential long-term care costs.
Another way to determine how much to save is to follow the 4% rule. This rule suggests that you can safely withdraw 4% of your retirement savings each year without running out of money during your lifetime. To use this rule, simply multiply your desired retirement income by 25 to determine how much you need to save.
Regardless of the method you use to determine how much to save for retirement, the key is to start saving as early as possible. The power of compound interest means that the earlier you start saving, the less you will have to save each month to reach your retirement goals.
In conclusion, how much you should save for retirement depends on your individual circumstances. Consider your desired lifestyle in retirement, expected expenses, and current income when setting your retirement savings goal. Start saving early and consistently, and regularly review and adjust your savings plan as needed to ensure a comfortable retirement.
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I was advised to diversify my portfolio among several assets such as stocks and bonds since this can protect my inherited portfolio of about $2.5m. I'm used to just buying and holding assets which doesn't seem applicable to the current rollercoaster market plus inflation is catching up with my portfolio. I'm really worried about survival after retirement.