Measuring What's Needed for Retirement
There is no set moment in your life to decide that it’s time to plan for retirement, just as there is no exact dollar amount that is required to save for your post-work life.
There is no set moment in your life to decide that it's time to plan for retirement, just as there is no exact dollar amount that is required to save for your post-work life. Both of those things are unique for each person and family. However, they both are of great importance for your long-term future in the interest of setting aside money for when you are done working.
Measuring how much you will need for retirement can be a complicated process, so it is wise to start planning early. Creating a retirement strategy takes patience, and the first step is calculating the amount of money to put away. Different finance experts each offer their own unique line of thinking on what you should save for that time of your life, because the total is mostly dependent on the salary you earn and the standard of living you envision living once you are no longer bringing in a regular paycheck.
In order to be comfortable after retirement, begin the process of calculating how much you'll need.
Choosing the amount to save
The most common strategy for retirement planning is setting aside a portion of your paycheck and sending that directly to a savings fund. According to CNN Money, the common theory is that people devote 10 percent of their monthly earnings to retirement. Over the course of three or four decades, that money should add up to a nice sum, assuming you are able to stay employed during that entire length of time.
The Boston College Center for Retirement Research conducted a study, however, and found that in many cases, 10 percent was not enough. Given the instability of pensions and declining reliability of Social Security, Americans need to devote more money to retirement than they have before. According to the study, a savings rate of 15 percent is recommended to achieve the income target most people desire for retirement.
To determine what amount of your salary to set aside for retirement, try and project what expenses you and your family may have. While it is impossible to calculate everything, as so much is unknown, having a set goal in mind is recommended. Several websites offer retirement calculators to help you walk through this process.
Having a backup plan
There may be a time you need the money that you'd been hoping to save for retirement. While nobody wants to dip into those savings, it may be inevitable. That's why having an emergency plan is so important, so that a withdrawal doesn't extend your work career for another five years.
When measuring how much is needed for retirement, make sure to include some extra cash that is available if needed. U.S. News and World Report suggested having six months of salary set aside for that occasion, so that you and your family can get back on your feet if a setback occurs.
Vectra Bank can help customers calculate how much money they will need for retirement.