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Britt Erica Tunick is an award winning financial journalist who has spent the past 17 years writing about virtually every aspect of finance. She has mastered the art of boiling down complicated financial topics for readers to understand. |
Do you have enough saved for the retirement lifestyle you will want? Learn what to factor in and how to calculate the savings you will need when the time comes. Are You Saving Enough for Retirement? By Britt Erica Tunick Whether you are five years from retirement or thirty five years away, it is important to occasionally get an overview of your current retirement savings in relation to how much money you expect you will need to live on at the time you actually retire. For most people, there is some sort of gap between their needed retirement savings and what they have already socked away. The earlier you are aware of this, the more time you will have to try and plug that gap. Before you can see where you stand in regard to your necessary retirement savings, you need to know how much you’ll actually need. One way that financial advisors suggest for determining your necessary savings is to target 70% of whatever your salary is just prior to your retirement. But that’s not the only thing to consider. Other variables that will factor in to how much you’ll need when you retire include the type of lifestyle you plan to live once you retire. If your retirement plans include traveling the globe, you may need more than you realize, whereas individuals who plan to move to a warm location and to scale back their expenses may be able to ease up on their rate of savings. A good way of determining your overall financial needs for retirement is to take advantage of retirement planning tools such as retirement calculators. Check to see if your bank offers one, or use one of the many available online, such as AARP’s retirement calculator. Given the importance of knowing that your savings is on track, you may want to consider hiring a financial advisor to help determine your needs and what you should be saving each year. And since your salary will vary significantly throughout your career, the further you are from retirement the more often you will need to adjust your savings target. If a review of your savings indicates that you are not saving enough, it is time to step up your efforts. Assuming that you can afford to do so, make sure to max out the amount that you contribute each year to your 401(k) plan or IRA. Stepping up the amount you put away each year by just a couple thousand dollars can mean a significantly larger retirement nest egg down the road, given the power of compounded growth. |
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