Financial planners frequently recommend replacing about 80% of your pre-retirement income in order to sustain the same lifestyle after you retire. However, there are a couple of factors to think about and not all of your income will have to come from savings.
A major part of retirement planning is to respond the question: How much do I have to save to retire? The answer varies by individual and is dependent mainly on your income now and the lifestyle that you want and are able to afford in retirement.
Knowing how much you will need to save based on you age now is only the first step however it starts you on the path to assist you with reaching your retirement goals. There are a couple of simple formulas that you can use in order to come up with the numbers.
What To Consider When Setting Your Goal
Decide On The Lifestyle You Want In Retirement
Most people want to maintain their standard of living in retirement. You should also consider other aspirations which would mean more income is required in retirement. Your income required before retirement and in retirement.
Determine How Much Income You Need When You Retire
You will most likely need less than 100% of your current income to live comfortably when you retire as some expenses fall away once you retire.
Ask yourself these questions:
- What would I no longer pay for when I retire?
- What would I still pay for when I retire?
What Expenses May Start Or Increases?
This may include new hobbies, aspirations like travel and health-care costs.
How Much Does A Couple Need In Order To Retire?
Much as with an individual person, how much a couple needs to save in order to retire comfortably will depend on their annual income at the moment and the lifestyle at they want to live when they retire. Many experts claim that retirement income should be approximately 80% of a couple’s last pre-retirement annual earnings. It is recommended that you need to save 10 times your annual income by the age of 67.
What Is the 4% Rule?
The 4% rule is a guideline that is used in order to determine how much a retiree can withdraw every year from a retirement account. It is meant to make retirement savings last for three decades.
How Much Should I Save for Retirement Every Year?
One rule that you should follow is to save 15% of your yearly earnings. In a perfect world, savings would start in your 20s and last all throughout your working years. So, if you win big with the real money bingo Canada has to offer when you’re young, set aside some of your winnings!
Oftentimes you’ll be able to save more for retirement and sometimes less. What’s very important is to get as near to your savings goal as you possibly can and check your progress at every benchmark in order to make sure you’re staying on track.
The Takeaway
Here are three basic steps to follow so that you can save for your retirement:
- Begin as early as you possibly can.
- Contribute consistently over time.
- Always preserve your retirement savings if you change jobs.
