Saving for retirement is an important part of financial planning, and it's never too early to start. But how much do you actually need to save in order to retire comfortably? The answer can vary depending on your individual circumstances and retirement goals, but here are some general guidelines to help you get started.
First, consider your retirement income needs. Experts generally recommend aiming for a retirement income that is 70-90% of your pre-retirement income, depending on your lifestyle and financial goals. For example, if you currently earn $50,000 per year, you might aim for a retirement income of $35,000-$45,000 per year. Keep in mind that you may have some expenses that go down in retirement (such as commuting costs), but you may also have new expenses (such as healthcare).
Next, consider your retirement savings timeline. The earlier you start saving for retirement, the more time you have for your money to grow. For example, if you start saving at age 25, you have 40+ years for your money to grow, whereas if you start saving at age 45, you only have 20+ years for your money to grow. This means that even if you're starting later in life, it's important to save as much as you can as soon as possible.
So, how much do you actually need to save? One rule of thumb is to aim to save 15% of your income for retirement. This includes any contributions to a 401(k) or other employer-sponsored retirement plans, as well as any additional savings you're able to contribute on your own. For example, if you earn $50,000 per year and aim to save 15% of your income, you would need to save $7,500 per year ($625 per month).
Keep in mind that these are just general guidelines, and your retirement savings needs may be different depending on your individual circumstances. For example, if you have high debt or other financial obligations, you may need to focus on paying those off before you can start saving for retirement. Similarly, if you have more ambitious retirement goals, you may need to save more than 15% of your income in order to achieve them.
At Bradford Financial Advisors, we understand that saving for retirement can be overwhelming, but we're here to help. Our team of financial advisors in Brighton, MI can help you develop a retirement savings plan that fits your individual needs and goals. Don't hesitate to reach out to us for more information or to schedule a consultation.