How Much Do I Need to Retire?
Many people ask themselves: how much money do I need to retire? Well, it’s not that easy. You need to save in such a way that you’re also left with enough money for your day to day expenses. But this won’t stop you from wondering whether you’re saving enough, or you need to increase the amount a bit.
How much you need to save depends on many factors, such as the amount of time you have until retirement, and how much you make per month. If you have no idea about how much to save, here are some useful tips to help you out.
Figuring Out How Much You Need
The 15% Rule
This rule works best for those who start saving at an early age – for example, while they’re in their twenties or early thirties. By saving 15% of your income for your retirement, you can ensure a good life for yourself at an old age. But what makes this rule so special?
Well, unlike other methods, this one doesn’t really have you worrying as much. You start saving early on, and you’re sure you will have enough money for retirement. So, all you do is set some money aside and let it gather over the years.
The 80% Rule
According to experts, the money you get in retirement should be 80% of the salary you used to have up to that point. That being said, if you’re used to an annual income of $100,000, then you need at least $80,000 in retirement to have the same life quality as you did when you were working.
Knowing this, you may figure out how much you need to save to obtain at least the necessary amount for a good life in retirement.
The 25 Times Rule
Another method to use when thinking about how much to retire is the 25 times rule. This works by checking how much you will get during retirement each year, after which you multiply that by 25 – considering that you will be spending the money for 25 years. What makes this method so good is that you won’t have to worry about losing your money, as you can take out around 4% annually without negatively impacting your funds.
Think About How Much You Expect to Live in Retirement
This is certainly difficult to predict because there might be numerous exceptions from the rules. But you need to take all the factors into consideration, such as how much your great-grandparents, grandparents, and parents lived. If they all used to live 80-90 years old, then you need to make plans in order to make sure you’ll have enough money for all those years.
As mentioned, you never know for sure, but there are many online tools that could help you out and estimate the number of years. It can be very useful and will help you in the long run.
The Bottom Line
If you were wondering how much to retire, we hope this article gave you some ideas on the topic. It’s better to start as early as possible, so you’ll have a proper budget for the present and for retirement as well.