(MoneyHippo.com) – Most financial experts stress how important it is to save for retirement. After all, you’ll likely want to stop working and enjoy your golden years at some point, but how can you do that without a nest egg waiting for you? One question you might have when putting money away every payday for that time in your life is how much you need to save. While the total can differ based on personal factors, here are some ways to figure out how much you might want to set aside.
- Future income: List your current monthly expenses, including incidentals. Add in future aspirations, like travel and entertainment or anything else you plan to do during retirement. Estimate what those expenses might cost in the future using average inflation numbers and multiply the total by 12. The resulting number provides a decent gauge of what you’ll need per year. Multiply the figure by the number of years you expect to live in retirement to determine how much you need to save.
- Get numbers help: There are many retirement calculators online that can assist you in determining how much you should set aside for the future. You’ll enter your age, gross income, current savings, and how much you plan to save each month. The calculator will tell you how much you need and let you know if you’ll hit that goal with your current plan.
- Rule of thumb: Take the annual salary amount you believe you’ll need to survive during retirement and multiply it by 25. That calculation gives you a rough goal. You should be able to withdraw 4% of the invested money to live off of per year in the future, and it should last three decades.
If you have questions or want to get on track with retirement savings, consider talking to a financial professional who will have the tools to steer you in the right direction.
Copyright 2022, MoneyHippo.com