One of the most important financial objectives is to stay on track to ensure you will be able to retire comfortably. The amount of money each person needs to save varies widely based on a number of different factors.
Retirement Savings Expectations: A new study by Northwestern Mutual found Americans now anticipate they will need to have $1.25 million stashed away for retirement, up from just $1.05 million a year ago. That's bad news for retirement investors given the average retirement account among those surveys has declined by 11% over the past 12 months to $86,869.
The same survey found the average expected retirement age has climbed from 62.6 a year ago to 64.
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Everyone has a different idea of when they want to retire, where they want to live and what lifestyle they want to have.
In addition, many people plan to have supplemental retirement income and may draw different amounts from pensions or Social Security.
There are a few rules of thumb investors can use to estimate how much they will need to save and whether or not they are on the right track.
Rules Of Thumb: One common rule of thumb is to save 10 times your pre-retirement salary and plan on living on 80% of your pre-retirement income. For example, this rule of thumb suggests someone earning $100,000 at their retirement age should save $1 million and plan on living on $80,000 per year in retirement.
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Fidelity recommends retirement savers have at least their annual salary saved for retirement by age 30. By age 40, Fidelity recommends having three times your annual salary saved. That number doubles to six times your annual salary by age 50.
Ideally, Fidelity recommends retirement savers start young by stashing away at least 15% of their annual income starting at age 25 and investing more than 50% of those savings in stocks.
Nerdwallet Inc (NASDAQ:NRDS) also has a customizable retirement calculator at this link that allows users to estimate how much they will need to save for retirement and how much they will likely have saved at retirement based on variables such as age, income and monthly savings rate.
Benzinga's Take: If you find yourself behind on your retirement savings, there's no need to panic, but it may be time to take aggressive action to ensure you will be on track by the time you reach retirement age.
If you're under 40, the simple solution may just be to save more monthly and take a more aggressive approach to investing by focusing more on diversified investments in stocks and less on bonds and cash.
Stocks have historically generated higher returns than other assets but may be extremely volatile on a year-by-year basis. The SPDR S&P 500 ETF Trust (NYSE:SPY) has generated a total return of 232.5% over the past 10 years.
If you are over 40 and are significantly behind on retirement savings, your best choice may be to meet with a financial advisor or another financial professional to get expert assistance in putting together a plan to ensure a happy and comfortable retirement.
See Also: Nearly 60% Of Americans Approaching Retirement Plan To Work Longer (Survey)
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