While you may daydream at your desk about your retirement plans, retirement is a long way in the distance for most of us. However, it's never too early to think about your future finances. So, how much money do you need for retirement? The answer is a little different for every person, but we have expert guidance to help you make the best informed decision for your present and future goals. Let's go through the steps to calculate what you need!
Rule of Thumb
Few of us want to work well into our golden years, so it's important to think strategically. Your savings need to be significant enough to support your lifestyle, but don't forget about funds from Social Security. Generally speaking, experts suggest that you will need to replace anywhere from 70 to 90 percent of your income through a combination of savings and Social Security. That may be a big number, but remember: You've got plenty of time if you start early!
What exactly will you need when you retire? Think about your current lifestyle, and try to imagine a few decades in the future. Your brand new home may be paid in full at that point, but will you want to spend extra time visiting the grandkids or indulging in your favorite expensive hobbies? This may shift your figures around a bit. Don't forget: Once you're retired, you aren't saving for retirement anymore. Make a list of all the different expenses you currently have and think about your dream retirement scenario.
Adjusting Your Budget
Now that you have a list of your priorities, it's time to play with the numbers a bit. Are you willing to spend less in the present to spend more in the future? Remember that number from before: You need to replace between 70 to 90 percent of your income with investments. If you budget to live frugally during your retirement and save more money from each paycheck in the present, you can lean on the lower end of that estimate. If you want to live lavishly during your golden years, then you should aim for a higher figure to supplement your future lifestyle. Proper planning is key! And don't forget: You always have options. You can consider personal loan services, like payday loans and cash advances, so you don't have to blow your savings on unexpected expenses.