How much money will you need to retire? If you’re like the majority of Americans, you don’t know the answer.
A Bankrate survey from June 2018 found that 61 percent of Americans don’t know how much they will need to have saved to fund their retirement. Meanwhile, a separate March 2019 survey found that 21 percent of working Americans aren’t saving at all. It’s no surprise then that half of working households are “at risk” of not being able to maintain their standard of living when they retire, according to the National Retirement Risk Index (NRRI) from Boston College’s Center for Retirement Research.
Clearly, something is going wrong with retirement planning.
There are ways to make sure you stay on track, though. Below you’ll find tips for what you can do to improve your ability to save and what goals you should be aiming for beginning today, no matter your age or financial situation.
Everyone is different, so retirement needs will vary. But in the end, we all need a cushion to finance the last bit of our lives. Rest assured, very few wind up working all the way until the end.
How much money will you need to retire?
When a client asks Dan Tobias, a certified financial planner at Passport Wealth Management in Charlotte, North Carolina, how much they’ll need to retire, he’s quick to redirect the question by asking the client what retirement looks like for them.
“Are they looking to drive a Lamborghini, or are they looking to move to a 55-plus type condo in Florida?” Tobias asks.
After Tobias understands the person’s retirement vision, he can apply certain rules of thumb. One is seeing what 4 or 5 percent of your retirement savings is, and what your lifestyle would be like living off that amount. If that number isn’t on target, you’ll have to either increase your retirement contributions or live more frugally during retirement.
Fidelity recommends certain levels of retirement savings as you age. For instance, at age 30 you should have at least your annual salary saved. When you turn 40, you should have three times your salary. And at age 50, you should have six times what you earn annually saved for retirement. By the time you turn 60, the goal is to have eight times your salary saved – and it should reach 10 times your salary by age 67.
Merrill lists saving 12 times your salary before retiring as one of its rules of thumb.
Bankrate’s Retirement Calculator can help you get a better idea of how much money you’ll need and whether you may need to work a few more years than expected.
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