How Much Will I Need?
A successful retirement savings plan starts with a few key points. Saving and investing for retirement doesn't have to be complicated, and there are plenty of good and reputable financial advisors out there to assist you along the way. The key is to determine how much you'll realistically need and then develop a plan to achieve your goal.
When setting your retirement goal, GreenPath recommends that you:
Focus on what you can control - how much to save and where to invest it.
Create a plan so you can track your progress.
Understand how much you’ll receive in Social Security, pensions, etc.
At semi-regular intervals, monitor your plan and adjust as necessary.
Begin by considering the lifestyle you envision in retirement. Most experts say you'll need roughly 70% to 80% of your current annual income to live comfortably. This could include sources such as Social Security and maybe a company pension, but it's wise to conclude that your personal savings needs to be a significant source of income for you during retirement. It’s best to have a variety of assets to rely on during retirement – Social Security, personal investments, employer pensions, real estate, bonds, etc.
Determine how much to save
If you’re not sure how much is enough, spend some time using one of these retirement calculators.
These calculators will give you a starting point for understanding how much you will potentially need in your retirement years. You may try increasing your savings amount to see how much more you could have. Remember that saving for retirement contains two important components - how much you save, and how regularly you do so.
If you adopt an automatic investment plan, you'll invest the same amount of money at regular intervals over a specific time frame, regardless of share prices. Known as dollar-cost averaging, this strategy helps you avoid trying to time the market and enables you to benefit from the effects of compounding returns.
Consider your retirement costs
Your retirement costs can be influenced by many factors, from everyday living expenses, to health care, to how often you plan to travel. And don't overlook the effects of inflation on your savings. You may need more than you think to achieve a comfortable retirement.
In conclusion, it’s important to annually review your plan to help keep your savings amount and investment choices on track to meet your retirement goals. If they're not, you may need to increase your savings, rebalance your investments, or rethink your expectations for living in retirement.