To determine how much you should save for retirement, consider these widely accepted guidelines:
Savings Benchmarks by Age
- By age 35 , aim to have saved 1 to 1.5 times your current salary.
- By age 50 , target 3.5 to 5.5 times your salary.
- By age 60 , aim for 6 to 11 times your salary.
- By age 67 , the goal is about 10 times your pre-retirement income to maintain your lifestyle in retirement
Annual Savings Rate
- Experts generally recommend saving 10% to 15% of your pre-tax income each year throughout your working career, typically from around age 25 to 67.
- A common target is to save at least 15% annually , including any employer match, to build a sufficient nest egg
Withdrawal Rate and Retirement Income
- The 4% rule is a common guideline for withdrawals: you can withdraw about 4% of your retirement savings annually to sustain your income.
- To estimate how much you need, multiply your desired annual retirement income by 25 (the inverse of 4%). For example, if you want $80,000 per year, you should aim to save around $2 million by retirement
Additional Considerations
- Your personal savings goal depends on factors such as your expected lifestyle, longevity, other income sources (like Social Security or pensions), and when you start saving.
- If you participate in employer-sponsored plans with matching contributions, you may reach your goals faster or need to save slightly less on your own
Summary
- Start saving early and aim for about 15% of your income annually.
- Use age-based savings targets (e.g., 1x salary by 35, 3x by 50, 6-11x by 60).
- Plan to withdraw about 4% annually in retirement.
- Adjust based on your personal circumstances and employer benefits.
Following these guidelines can help ensure you have enough to maintain your lifestyle in retirement without financial stress
