How Much Money Do You Need For Retirement?

So, you’re making your retirement plans and you’re wondering how much money you need for retirement. Here is everything you need to know.

Whether you plan to retire early or not, or you’re on sure of when to retire, this article is written to equip you with all the knowledge you need about planning for your retirement, saving for retirement, and how to decide how much you need to save to retire as well as how much money you need for retirement.

Also, whether you are 20, 35, or 45; already saving for your retirement or planning to and is uncertain of how and where to begin, this article is sure to offer you some value as well as answer most of the questions you have about how much you need to for retirement.

So, why don’t we get right in!

Planning Your Retirement

As the proverb goes, “The best time to plant a tree was 20 years ago.” This can be likened to your retirement plans as it is never too soon to start your retirement plans especially if you want to retire early.

Well, who doesn’t?

According to a financial wellness educator, Danetha Doe, the second-best time for anyone to start their retirement plans is today.

According to Gettysburg College, most people work about 90,000 hours in their lifetime which equals one-third of the average lifespan. This can tend to keep one from engaging in some other life-prolonging activities such as getting adequate rest, traveling, and some other fun activities.

How about shaving some hours off the aforementioned average and getting to retire early to have some fun?

Basically, one of the best times to start saving for your retirement should be as early as your 20s or 30s. However, this is not a thing to beat yourself about if you are in or have crossed your 30s and are yet to begin your plans for your early retirement.

As much as it is not too early to begin making your early retirement plans, it is also not too late to start especially when you have the means. What is not ‘alright” is waiting much longer to begin.

While you’re here, check out: How To Retire At 50 As A Millionaire! Retirement Dreams

What is the Best Age to Retire?

To retire early or not?

What does early mean to you: 55, 65, 70…100? Before you are able to begin your retirement plans, you need to have decided when you want to retire.

However, for the purpose of this article, we shall be using retirement at 55 as the case study as it is usually the ideal retirement age.

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Although some other sources may argue otherwise, this report shows that the ideal age range to retire is between ages 41-45.

However, while you may want to retire at that age if you have the means, we recommend it is unadvisable to retire too early or as soon as possible so as not to feel empty for never living up to your true potential.

While that is true, retiring too late will leave you wandering in regrets about the things you never took the time to do.

So when is it ideal to retire? What is the ideal retirement age?

Other sources such as 53.com, principal.com, and Gallup Survey suggest that the ideal retirement age is between 61 and 65.

When Should You Retire?

Basically, choosing the best age to retire is one of the major retirement planning strategies followed by the proper financial retirement strategies. Although the onus is on you to decide what age is ideal for you to retire at, there are some things you may need to consider:

  • What type of lifestyle would you like to have in retirement?
  • How much money will you need monthly as well as annually to sustain that lifestyle after retirement? This is where financial planning come to play.
  • What is your current savings rate as well as your existing assets?
  • How long do you anticipate living in retirement?
  • Which income sources do you expect to have during your retirement: pension, taxable accounts, social security, etc.
  • How much do you plan to spend on healthcare as well as for deciding if long-term care will be necessary?
  • What will your tax situation in retirement look like?

Source: Yahoo Finance

Also, check: 10 Cheap Ways To Make Money In Retirement | 2022

Generally, finding the best age to retire is not always easy. In fact, it can be hard and confusing and the best way out is always to speak with a financial advisor.

Tips for Retirement Planning

Below are quick tips to help with your retirement planning. These tips are helpful whether or not you have already started on your plans.

So, right here!

  • Meet a financial advisor to discuss social security benefits planning as well as where it might fit into your retirement plans. If you don’t have one yet or are looking to get one, here are the 20 Best Financial Advisors 2022.
  • While you benefit from the financial advisor’s advice, you may want to take some things into your hand such as getting insights using a retirement calculator.

Deciding How Much Money You Need to Retire

How much do you need for retirement? Answering this question doesn’t have to be overwhelming. While everyone has their different wants and their ideas of an ideal retirement, it is important for you to estimate your specific goals and needs.

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In answering the question of how much money you need for retirement, you must first decide what age is ideal for you to retire.

While there is no universal answer to how much money you need to retire, the amount of money you need may depend on your unique financial circumstances as well as your retirement goals.

To make answering easier for you, here are some questions you may need to answer first to determine how much you need to retire:

  • When do you want to retire?
  • Would you want to work part-time after retirement?
  • How long do you anticipate to retire for?
  • What sources of income will you have post-retirement?
  • Will your expenses increase or decrease after retirement?
  • Do you plan to relocate to a lower or costlier cost of living area during your retirement?

While you answer the above questions, bear in mind that the amount you need to retire comfortably largely depends on your personal goals.

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How Much Money Do You Need For Retirement?

In deciding how much you need to retire, you may need to follow some retirement strategies. Generally, financial specialists recommend various retirement saving strategies.

According to Fidelity, you should save at least, 15% of your pre-tax salary for retirement. However, this is only ideal if you started your financial planning for retirement early – say at age 25 if you wanted to retire at 62 or at age 35 if you wanted to retire at 65 – says Forbes. This is because your age has a huge impact on the amount you should save for your retirement.

While you save for your retirement, it is also important you plan to have an annual income in retirement which should be equivalent to up to 55-80% of your pre-retirement income.

Also, according to Danetha Doe, one of the best strategies for saving for your retirement is the common rule of thumb: Take your current salary and multiply it by 10. She provides the following example:

“If you earn $80,000 per year, the formula states you will need to have access to $800,000 to retire. Now, keep in mind, that if you are planning to retire at 55, you will (heaven willing) need to have enough saved for 20 years or more. Using the formula I just shared, that means you will be living on $40,000 per year or half of the salary you were accustomed to ($800,000 over 20 years).

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For some people, this would not be enough. Or, $40,000 per year may be enough if you choose to retire in a part of the world where the cost of living is [lower than you’re used to]. My suggestion is to use the formula to set a baseline. Then, do research on what it would cost to live the lifestyle you wish to experience in retirement.”

See also: 15 Biggest Financial Mistakes People Make

So, how much do you need for retirement?

While those have been listed, we can’t stress enough that are only rough estimates, however, they should give you an idea about how much you should be aiming for.

Conclusion

Generally, some people want to retire early to have some time for other fun things while most others wish to retire early for financial freedom. The key is to know what you wish to experience during your retirement; have a personal retirement goal, define success on your own terms, and take the steps necessary to help you achieve them.

Again, there is no universal answer to how much money you need for retirement, however, we hope you found our tips more useful in helping you decide how much you need to retire.

FAQs How Much Money Do You Need For Retirement?

How much money does the average person need to have to retire?

While there is no universal answer to how much money you need to retire, the amount of money you need may depend on your unique financial circumstances as well as your retirement goals.

How much should I save for retirement?

You should save at least, 15% of your pre-tax salary for retirement.

How much should I have saved for retirement by age?

  • By age 40, you should have three times your annual salary.
  • Six times your salary by 50
  • Eight times by 60
  • 10 times by 67 – according to Investopedia.

What are the best retirement calculators?

What are the best free retirement calculators?

  • Personal Capital’s Retirement Planner
  • The Ultimate Retirement Calculator
  • Fidelity myPlan Snapshot
  • Flexible Retirement Planner
  • Vanguard Retirement Nest Egg Calculator

References

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