Determining How Much to Save For Retirement
Determining how much to save for retirement doesn’t have to be the daunting task that many make it out to be.
With the correct planning, foresight, and action, you can begin setting money aside for retirement today.
In the sections below, we’ll be detailing the different ways you can begin preparing yourself, and your family, for that day when you can finally hang up your boots (so to speak) and enjoy a life that resulted from your years of toil.
Make a Plan
The term “retirement plan” gets tossed around a lot, and for good reason.
First and foremost, you should begin planning for how much to save for retirement. Your retired self will be ever grateful.
Even if you’re living paycheck to paycheck and the easy street seems miles away yet, begin formulating a plan to ensure that come retirement, you’re not putting yourself out on the streets.
Each person will have different needs, so begin by examining yours. How much will you need each month? How much should you save each month? How much will you receive from Social Security ? Ask yourself these questions and move on from there.
Once you’ve started to formulate your plan, it’s time to start setting goals for yourself.
It’s important, though, to make sure these goals are realistic and attainable. Begin by reviewing the value of your current assets. For example, if you own a home and are paying a mortgage , evaluate how much you will net from selling the property or how much you could receive from refinancing your home .
For example, if you own a home and are paying a mortgage, evaluate how much you will net from selling the property or how much you could receive from a reverse mortgage.
Use these figures to project how much to save for retirement based on the projected returns over time.
Doing so will get you closer to determining how much you should be saving every chance you get.
Build an Emergency Fund
First and foremost, you should build an emergency fund to cover unforeseen events such as a layoff or medical emergency.
Many financial experts recommend that this emergency fund should be built before even beginning to determine how much to save for retirement.
Life is filled with trials and tribulations, having an emergency fund in place will help ensure that you’re able to weather the storm without undue financial hardship.
As a general rule of thumb, your emergency fund should have enough to cover a year’s worth of expenses (ideally). If that’s too high a target, shoot for six months. Lastly, this fund should be kept separate from other savings and should only be drawn from in, you guessed it, times of emergency.
Get Rid of Bad Spending Habits
Those impulse buys that you’re so fond of can add up quickly. Next time you’re standing in line at the grocery store, ask yourself, do you really need a new plastic trinket?
Eliminating frivolous spending habits is crucial to not only retaining more of your earnings but properly budgeting your savings, too.
Getting rid of other habits, like smoking cigarettes, for example, can drastically increase your ability to save for retirement.
Try evaluating your spending habits (and other associated habits) to get a good grasp of how much money you need each month. Using this spending map as a guide can help you determine how much to save for retirement.
Once you’ve got a handle on how much you’re earning and how much you’re spending, begin saving, aggressively .
This doesn’t mean that you should sacrifice your quality of life now so that you have a better retirement. Rather, it means you should carefully evaluate where your money is going so that you may start putting more of it away into savings.
Did you receive a bonus from work this year? Great! Did you get money back from a tax return? Excellent! Extra income such as these are terrific opportunities to pad your retirement plan, and maybe even get ahead of your goals.
Eliminate Outstanding Debts
It’s hard to keep the money you’re earning when you’re paying off a credit card balance with the minimum payments.
Some debts are better than others, though. Pay off the debts with the highest interest rates first, then move on to other payments.
Eliminating debt is a critical factor when trying to determine how much to save for retirement.
Diversify Your Income
Do you have a skill or hobby that you could earn money from on the side? Do it!
The ability to earn an income from a source other than your job will provide a great boon to your ability to save.
Furthermore, it creates additional security from a potential job loss, no matter how unlikely it might seem.
How Much Should You Be Saving?
After all that, the question of “how much to save for retirement” remains.
But don’t fret! Use the tips detailed above to guide you through the beginning steps of the process. It is, after all, a process. And it requires a plan, attainable goals, and your action.
Each case varies, and unfortunately, there’s no magic number that will guarantee you a comfortable retirement.
Do the work, crunch the numbers, and set money aside to watch your nest egg grow.
Take Your Time
Saving for retirement is a lot of work, but your future self will be thankful that you took the time (and the money) to do so.
You don’t have to figure it all out alone, though. Consult with a financial advisor if you need help formulating a plan and setting goals.
There are also tools available to aid in your retirement plan. For assistance with formulating your plan, or to check your progress and measure your success, try one of our top retirement calculators today!