If you are planning retirement you may be asking yourself how much do you need to save for retirement. Sadly there is no one size fits all answer to this question. The answer on how much to save will vary from one person to another based on life style and income needs. One thing is for certain however and that is that saving for retirement today will help you reach your retirement goals, but putting off saving for retirement could mean the difference between having a solid retirement plan and having a poorly funded one.
You need to account for several factors when you want to determine the amount you will need when you retire.
* The rate of inflation, your dollars today will be worth less in the future unless invested where the money grows past the rate of inflation
* What life style you wish to live when you retire. Experts claim if your mortgage is paid off that you should plan to replace 70% of your pre-retirement income through various sources for use during retirement, not counting social security income which does not amount to much.
* What age you plan to retire directly affects how you plan to save for retirement and how much per year you need to invest to reach your goal.
* What rate of return you want for your investments.
If you start saving for retirement in your early 20s you are setting yourself up for a great retirement, but sadly most of us do not start planning for retirement until well into our 30s. If you are in your 30s the most basic advice is to place 15% of your salary into your companies 401k if one is offered, or into a IRA if your company does not offer one. If your employer contributes 5 percent of pay you would only need to save 10% to your 401k, but in the case with the 5% that you do not need to allocate to 401k you should allocate it instead to another retirement investment such an IRA or federal T bonds to further diversify your retirement portfolio. If you began to save in your early 20s you are in a better spot retirement wise.
According to the Boston College Center for Retirement Research (CRR) :
If you start saving at age 25 and you:
Retire at age 62: Save 15 percent of pay
Retire at age 65: Save 10 percent of pay
Retire at age 67: Save 7 percent of pay
If you start saving at age 35 and you:
Retire at age 62: Save 24 percent of pay
Retire at age 65: Save 15 percent of pay
Retire at age 67: Save 12 percent of pay
If you start saving at age 45 and you:
Retire at age 62: Save 44 percent of pay
Retire at age 65: Save 27 percent of pay
Retire at age 67: Save 20 percent of pay
Here you can see how age of retirement versus age you started saving equates into how much of your salary you need to put away into retirement savings. The sooner you begin to save the better off you will be, but you can still make it at age 45 to start your retirement savings, but you will need your mortgage paid off to make it.
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