No matter how you look at it, saving for retirement while balancing all of your other financial demands is challenging. However, the actions you take now can have a powerful impact on your future well-being.
Trying to put a number on the total nest egg needed to secure your retirement years can be a daunting task, but these benchmarks can provide some ballpark figures to get you thinking.
- Age 30 Retirement Savings = .5 times your annual salary
- Age 40 Retirement Savings = 2 times your annual salary
- Age 50 Retirement Savings = 4.5 times your annual salary
- Age 60 Retirement Savings = 8.1 times your annual salary
(Money Magazine, “Make Your Money Last”, April 2012)
These ballpark figures assume a normal retirement age (currently 66), an asset allocation that includes stocks (historically the best performing asset class) and a slightly reduced monthly income after retirement.
If your retirement account needs some major help consider the following action plans:
- Boost retirement savings to a total of 15-20% of your income. Defer more of your income or make a contribution an Individual Retirement Account (IRA).
- Trim costs by refinancing your home mortgage, eliminating a landline phone and putting money in your Health Savings Account (HSA) or Flexible Spending Plan. That way, Uncle Sam takes less of your money and you get to keep more! In fact, those three steps can easily net you over $100 a month to put toward retirement—adding hundreds of dollars of additional retirement income.
When you reach your 60s, you may need to reassess your situation and postpone retirement. Regardless, do some thinking about your life in retirement and try some of those retirement activities you always dreamed about. You might find doing that makes work a lot more fun!