Tips For Calculating How Much To Save For Retirement

How much to save for retirement is a daunting question that most people face, as they get older. When should I start saving? Am I saving enough? Unfortunately, there is no simple and straightforward answer to these questions. It can be difficult to figure out how much you should save and many people end up worrying about it and feeling as if they have to live a meager lifestyle now in order to save up for later. With a little planning, that does not have to be the case. You may have heard that you should set aside ten percent of your annual salary each year.

While this may be a fine idea for some, really no set number or percentage broadly fits every person’s situation. Several factors should be taken into consideration when planning your individual retirement funds.

Calculating How Much to Save for Retirement

Your personal figure of how much to save for retirement will depend largely on your current age, your projected retirement age, your income, how much you have saved up so far, your investments and how much they earn, and your goals and desires for retirement. How much time you have left to continue saving before you retire largely determines how much you need to set aside each year. And since you have no way of knowing how long you will be living off of your retirement funds, knowing how much you will need can be a little tricky.

You may think that the more money you make the easier it will be to save for retirement because it will take less of your paycheck now. You may be surprised to find that if you enter your parameters into a savings calculator (the one at will give you a quick ballpark estimate) and receive a certain percentage, then increase only the income figure in the calculator, the percentage of your paycheck you need to set aside actually increases, not decreases.

This happens for two reasons. First, assuming that you wish to live a similar lifestyle during retirement to the way you are living now, then generally the higher your income level, the more you will need to have saved up to carry your current standard of living on into retirement. Second, the calculator considers Social Security benefits. Social Security is designed to provide you with a smaller replacement of your current income as your amount earned rises. So, the more you make now, the less Social Security will provide for you later which means that you will have to make up for the difference of how much to save for retirement out of your own income.

The amount you have already saved up also comes into play when determining how much to save for retirement. The larger your current nest egg relative to your annual salary, the less you have to continue to put in to reach your end goal at retirement. For example, if you are 30 years old, make $30,000 a year, and have $20,000 saved up, you only need to set aside at a savings rate of 6.1 percent annually to retire at age 65 with 80 percent of your pre-retirement income.

This is because $20,000 is an impressive chunk of change considering the amount you make or the necessities to continue your current lifestyle. However, for a 30 year old making $60,000 a year who has only saved up $20,000 thus far, a 10.7 percent annual savings rate is required to retire at 65 with 80 percent of their income. So, the more how much to save for retirement and set aside in total, the lower the percentage of your income that will be necessary to put away to reach your goal.

So How Much Do You Need in Total?

It is often said that you will need a million dollars to retire comfortably in the United States. While this may be true for some, it is not the case for everyone. Another calculator featured by CNN Money can be found at CNN Money and will give you a lump sum figure of how much to save for retirement. For that same 30-year-old making $30,000 mentioned above with a life expectancy of 90 years, a $1000 annual pension, and expected Social Security of $12,608 (provided by the calculator), a projected total of $503,840 is needed.

The figures mentioned have been assuming that you still have twenty years or more left to save before retirement. However, what about those who plan to retire in ten years or less, obviously, your situation is going to be different and you may find yourself a little strapped in the coming years trying to prepare for retirement. Some things you can do to make up for lost time are to find more income (whether by working more hours, obtaining a second job, or maybe through investments) and to work toward reducing any debt so that you do not owe upon retirement.

Calculators and/or financial planners can help you come up with and stick to a realistic figure of how much to save for retirement. The average American has nowhere near 1 million dollars saved. In fact, most Americans save way too little only to realize it much too late. Do not let yourself be one of those people. You are never too young to go ahead and start saving for retirement and every little bit helps.

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