Do you want to be able to live comfortably in your retirement?
Are you worried about running out of money in your golden year?
Is all of the information out there about retirement savings, a bit confusing and overwhelming?
The most important thing people need to do for retirement is to save…
…but how much should you save?
You may have heard things like:
- Maximize your employer match
- Save 10% of your salary every year
Let’s take 2 hypothetical examples:
Mike and Molly
Mike’s income stays the same, he makes one hundred thousand dollars per year for forty years.
Molly’s income increases from starting at twenty thousand dollars per year to increasing with regular raises to one hundred eighty thousand dollars per year shortly before she retires.
Let’s assume that they both:
- Save 10% of their income every year
- Get a 4.5% annual return on their investments
Mike will wind up with $1,128,000 and Molly will wind up with $864,000.
This means that Mike’s portfolio can replace fifty one percent of his pre-retirement income while Molly’s can only replace twenty two percent of hers.
Research shows that how much your income increases over your working life has a major role in how much you should be saving for your retirement.
Now if Molly wants to replace 40% of her pre-retirement income she would have to increase her yearly savings percentage on a pre-determined schedule.
She could start off at 5% when she begins working while she is earning 20K per year and end up saving 15% while she is making 180K per year to accomplish this.
Now his portfolio would end up with 1.5 million instead of $864,000.
With this strategy it makes saving much more manageable, by having your savings rate start out lower and increase with your income raises.
Whether you are Mike or Molly, the main parts are:
- To save consistently
- To save more as your income rises
- Consistently monitor your progress
Here’s Your Next Step…
You can determine these figures by speaking with a qualified professional to help you run the numbers accurately based on your personal retirement goals.
If you would like to figure out how much you need to save for your retirement give us a call today at 410-435-3270 or simply click here to request your free analysis online.
Our expert retirement planners are available to walk you through the process so you don’t have to guess anymore.