Good Morning Everyone. It’s time for another post in our Retirement Planning For Young 20 Something Investors series. As a Financial Planner I am often asked the question how much should I save for retirement? The honest response is that there is no easy answer. Retirement is different for everyone, and depends on our personal situation.
How Much Should I Save for Retirement?
How much we should save for retirement depends on our pre retirement income as well as the lifestyle that we wish to maintain during retirement. The retirement needs of someone who is mortgage free are different from someone who retires with a mortgage on their home. The retirement needs of someone who plans to fund their grand children’s education is completely different from someone who has no financial dependents.
There are two very basic financial principals that apply to anyone who is saving for or planning their retirement. In order to save for retirement we must Create Our Investment Portfolio as well as Start Planning for Retirement Early. If we choose the right investments and we start saving at an early age, we are already on the right financial track towards saving for our retirement.
Retirement savings are an important part of our retirement goals. We can determine how much we need to save for retirement by using a 401k Calculator. In general our retirement income should be approximately 70% of our pre retirement income. Using a 401k Calculator can help us determine the future value of our investments, as well as how much we need to save now for our future retirement.
Easy Strategies to Help Save for Retirement
The easiest way to save for our retirement is through pre authorized contributions. This allows us to contribution a fixed amount (the minimum is usually $25) into our 401k or retirement savings plan on a regular basis. A pre authorized contribution withdrawals money from our bank account and deposits the money into our retirement savings account. It is an automatic transfer at the frequency that we choose, such as biweekly or monthly.
Another easy way to save for our retirement is to invest our year end or quarterly bonus directly into our 401k or our retirement savings account. This guarantees that we will keep continuously saving throughout the years.
Retirement Planning and 401k Calculators
Many financial institutions offer a variety of 401k calculators to help clients save for retirement:
Chase Bank offers the Chase Retirement Calculator to help us work towards our retirement goals. The Chase Retirement Calculator is complete with retirement goals, investment and savings strategies, calculations, as well as suggestions on the next steps and plan of action.
Mint is budget software that allows us to work towards various financial goals which include retirement. We can import our current retirement savings account information from our financial institution directly to Mint and they will keep us updated on the progress of our retirement goals.
HSBC tells us that It’s Time to Prepare for The Future of Retirement. Their website offers many helpful links for all types of retirement lifestyles such as living abroad, planning early retirement, evaluating our retirement needs, and downsizing our home. The HSBC retirement process is done in three steps which include Planning for Retirement, Approaching Retirement, as well as Living in Retirement.
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