The question everyone is asking: How much do I need to retire?
When it comes to saving money for retirement, we all know we should be doing it. But, how much do you need to save? A recent study showed of the people polled who did manage to save some money, half of them had less than $1,000 put aside.
Obviously, $1,000 is not enough – but what is “enough”? Pinning down the exact amount of retirement savings you'll need is pretty much impossible. There are a few different viewpoints, but everyone agrees on one thing: You’re probably going to want to stop working at some point and you’ll need money to support your lifestyle.
There are so many factors that will come together to determine how much retirement ultimately costs you, from your health to your lifestyle to the number of years you end up living to who knows what.
A widely accepted rule for retirement is to put away 10 times your salary. Your salary then, at retirement age, not your salary now.
If you do that by the time you leave the workforce, you should, in theory, be in pretty good shape. For most of us, this works out to be about $500,000. We picked this number because $50,000 is the average salary across the US -- but, of course, use your own numbers and personalize your plan. At this stage of life, lots of us will sell our (hopefully paid off) homes, cash out any investments we’ve made over that past 30-40 years, and get ready to relax.
The difference between a person who begins to save in their twenties versus their forties is a big one.
Working from our $50k example, to hit that half-million dollar goal, a person with 40 years to save needs to put aside $80 per week, while a person with just 25 years to save has to sock away $200 per week.
The lesson here? Start early, act now, and have a plan.