Planning retirement is a critical thing. The age that you plan for your retirement hugely impacts on how much you need to save to live a financially secured life after retirement.
If you are thinking of retiring at the age of 65, consider the following factors to understand the ideal figure you should be saving for your retirement.
- What type of lifestyle do you want to live after you retire?
- Do you wish to spend time with your grandchildren or want to roam like a free bird and explore the world?
The questions can be many, but you need to think realistically. Once you reach your retirement age, some of the expenses will go down while some may rise. The next step would be understanding your current financial condition to plan well for your retirement. The points enlisted below will help:
- How much have you saved till now?
- What is your annual income?
- How much time is left till retirement?
How much you need to save?
- 80% Rule
You need to save 80% of your pre-retirement salary to live a stable life after retirement. Suppose at the time of retirement you make $100,000; you need to save $80,000 per year to have a comfortable lifestyle. The amount can vary if you have other sources of income like pension, part-time employment, etc.
- 4% Rule
The easiest way of calculating the income that you require to save is to divide your desired retirement income by 4%.
You can also move by saving 25% of your salary, starting from the age of 21. It can help to save the desired amount to lead a stable life after retirement. Your ability to save depends upon the events of your life. At times you will save more and sometimes less even.
The important thing is to get close to your goal by the time you attain the age of retirement.