How Much do I Need to Save for Retirement

How Much do I Need to Save for RetirementWhen asked the question, “How Much do I Need to Save for Retirement?”, the answer really depends on how much you have already saved for retirement. Also how old you are and what your expectations are for your retirement. We will discuss these topics in a little more detail in a moment. The chart on the left gives and indication of how much money you should have saved by age if your objective is to have one million dollars saved by retirement at age 65. It assumes continuous savings as well as investments that perform and income from those investments being reinvested. It also assumes that you do not dip into these savings at any time for things like house payments, mortgage payments, emergencies and so on. Let’s look at each of the issues we mentioned earlier.

How Much do I Need to Save for Retirement

How much you have already saved for retirement – Your savings rate at your current age will depend on whether you are trying to catch up or just maintain the savings rate you have. If your age 45 for example and have already saved $245 thousand, you are well on the way, providing you continue the savings rate. On the other hand, if your savings are zero, then you have to somehow make up the $245 thousand and also continue savings at the rate called for in this chart to achieve one million by 65 years of age.

How old you are – As mentioned in the previous paragraph, age does matter when planning for retirement. If you are just starting out at age 20, then you have lots of time to achieve the objective, however if your 55 and have not saved enough, then you had better keep working until you have achieved the objective you have set for yourself. The next question really sets the tone for how much do I need to save for retirement.

What your expectations are for your retirement

This is the key to the question. If your expectations are in line with your current lifestyle you are probably ok. If your well on the way to achieving your saving objective, you may be in great financial shape. But let’s assume you want to travel, buy toys that you never had and join golf clubs. You might find that your lifestyle objectives for retirement are much higher. Saving more might be in order to guarantee the lifestyle you are looking for.

The basic question: Do you have enough savings to generate income for you in retirement that meets your current pre-retirement income level. Is that enough to sustain the lifestyle you are planning. If yes, they you are ok, if not, then you either must work longer or save more.


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