Are you saving enough for retirement? This is a question that seems far off early in our careers but as we grow closer to the end of our working days we become more aware of our retirement plan and our savings. As you continue to think about retirement and life after work, it important to ensure your savings plan is on track or close the track you have estimated you will need in retirement.
There are various factors to consider when calculating your required retirement savings. This includes your current age, your current income, your savings rate, and the year you plan to retire, among other things.
In order to feel confident in your savings strategy, it is wise to check-in regularly on savings progress every few years if not every year. When you analyze your retirement savings status you can determine if you are ahead of the game, right on the line, or behind in regards to your age, income, and current nest egg.
Below we have broken down some saving guidelines for recommended targets based on figures from financial planners and institutes.
While the amount you need in savings is highly personal, and specific dollar amounts can be arbitrary, this is a simple formula to help you figure out if you're setting aside enough money.
By age 35: Have twice your annual salary saved.
By age 40: Have three times your annual salary saved.
By age 45: Have four times your annual salary saved.
By age 50: Have five times your annual salary saved. This is a good checkpoint age and you should have five times your annual salary saved by age fifty. If are not here yet, this is the time to start making those catch-up contributions and to start saving in other retirement funds such as a Roth or Traditional IRA in addition to your 401K. Also, you should start focusing on getting all debt paid off at this point, even your mortgage debt. Debt payments can be a serious drain to a comfortable retirement life, you can learn more about a great debt consolidation program here.
By age 55: Have six times your annual salary saved. At this point, you should have six times your annual income put away. Again, catch-up contributions are essential if you’re behind. With only 10 years until the average retirement age (65), you’ll want to make retirement saving a major priority if you don’t have as much saved as you would like to. Consider raising your 401k contribution and other investments as buckling down big time to hit a goal worth all efforts: an enjoyable retirement with no money concerns.
By age 60: Have seven times your annual salary saved. At age sixty you should have seven times your annual salary saved. The powers of compound interest should be working heavily to your advantage at this point in time.
By age 65: Have eight times your annual salary saved. Age sixty-five is when most people who haven’t retired already are thinking seriously about stepping into a comfortable retirement. At this point, you should have at least eight times your annual salary saved. So, if you’ve been making $75,000 per year, you should have at least $600,000 in your 401k account.
Overall planning and targeting are the important takeaways for building your retirement savings. Once you know where you stand you can work on getting to where you need to be and hit your savings goals to secure a comfortable life after your working days.
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