Retirement. It is the dream of every hard worker in the world after decades of hard work in their fields.
The average retirement age is 61 years old. Yet, a lot of life can happen after retirement.
Why? Because the average lifespan in the US is about 78 years.
With this in mind, you might be wondering, do I have enough for retirement? This is your guide to help you figure out the answer to that question.
Do I Have Enough for Retirement?
First, you need to figure out how many years that you need to save for. Considering the average retirement age and average lifespan above, you will probably want to have at least 20 years worth of savings in there.
You could live longer and shorter obviously but the odds are that if you retired later at say 65 years old, you would have a 76% chance of living at least 10 more years. Then, you would have a 38% chance of living 20 more years.
Keep these percentages in mind when you start planning for retirement, as difficult of a subject as it might be to think about how long you have to live.
Then, think about your average salary before retirement vs. the amount of money that you have saved.
Let’s say that you were making $100,000 a year before you retired. If you want to keep a similar lifestyle that you were living while you were working, research suggests having 80% of your salary annually saved for retirement.
What that means here is giving yourself an $80,000 per year salary after retirement, especially in the early years before you are eligible for full social security benefits (67 years old).
Then, you should multiply this by 25 years to be safe. With quick math, that is about $2 million that you should have stashed away in retirement savings.
Ways to Build Money for Retirement
Over the years, you will want to try to find ways to build up your savings for retirement, with one of those options being a 401K plan. For certain employers, they will match any contributions that you make up to a certain amount.
Others will give you a percentage match, which is still basically free money if you put it away. For most people, this can be their version of a pension, and the recommendation is to not touch this before the age of 60 to avoid withdrawal penalties.
You can check out this 401K retirement blog for what to do after retirement.
Then, there is your social security. As mentioned above, you cannot receive your full benefits there until you are 67. This is typically determined by accounting for the average of your 35 highest earning years, then receiving a percentage of that.
Most of all, you should consider investing rather than saving in your younger years. While you run the risk of losing money, you will not gain anything if you just save money, which can leave you too far from retirement by the end.
Save Correctly for Retirement
Do I have enough for retirement? If you follow the above advice, you should have enough saved when all is said and done.
But, if you are on the younger side, you should consider absorbing this advice so that way you do not get left behind.
For more relevant articles, check out our Finance section.