Planning for Retirement: How Much Should I Save for Retirement?

how much should i save?

Over one in five Americans doesn’t have any retirement savings. Even the savers aren’t putting enough money to one side.

Nearly half of people saving for retirement put away less than the minimum recommended amount per year. This could be a ticking time bomb as many Americans are entering retirement without anything savings at all.

Yet, many people will be wondering how much should I save for retirement?

Check out our guide below to learn everything you need to know about how much you should save. Let’s go!

1. How Much Should I Save?

You could say that the answer is to this question is simply – “as much as possible”. You’re probably not going to regret having a large nest egg when you get to retirement age.

Yet, throwing endless sums of cash into your savings isn’t always easy. You need to live for the here and now as well, right?

That’s why you should probably aim to save around 10-15 percent of your pre-tax income for retirement. Therefore, if you earn around $40,000 per year, around $4,000-6,000 should be saved for retirement. 

2. Learn From Rule of Thumbs 

This a good rule of thumb to help you know how much to save. But, there are several factors which could determine how much you need.

What Is Your Life Expectancy?

The average American lives to around 78 years old. But, you cannot say for certain whether you’re going to die earlier or later than this, unfortunately.

You don’t want to find yourself living longer than you predicted without the cash to live how you want to live. You may want to aim closer to 90 or 100 years to be on the safe side.

What Do You Earn and Save?

The medium income in the US is around $47,000 per year.

If your salary is above this amount, you’re a higher earner. Therefore, you can probably expect to be saving even more than 10 percent of your income in retirement savings. If you earn under the medium salary, saving roughly 10 percent of your income for retirement can be counted as a success. 

How Do You Want to Live in Retirement?

Of course, people have different expectations for life in retirement. You may want to live in your own home without spending much money on lifestyle expenses that you probably don’t need. However, if you want to retire in a luxury apartment with an expensive lifestyle, you need to consider how much this is going to cost without a salary.

3. Estimate Your Expenses in Retirement

You cannot base your retirement plan on rules of thumb alone. Sure, this is a good way to get started. But, sooner or later, you need to do the math yourself.

Put together a budget for future you. You need to demonstrate your spreadsheet skills here. 

You may have some expenses now that are going to be the same when you’re retired. For example, your groceries are probably going to stay the same. Hopefully, you won’t have mortgage payments anymore though, so you can cut this from your budget. 

Remember, you may also have expenses in retirement which you don’t have right now. Always wanted to join a golf club when you’re older? Do you also need to consider extra healthcare costs?

You just need to calculate this for 12 months and then times by how many years without an income you estimate during retirement. Once you’ve done this, you’ve got your magic number. 

4. The Younger You Save the Better 

The maxim the “younger you save the better” should be the motto of every financial advisor

To some extent, it’s not how much you save each month, it’s how early you start saving for retirement. 

That’s because of a wonderful thing called compound interest. None other than Albert Einstein called this “the most powerful force in the universe.” 

That’s a ringing endorsement of saving while you’re young. You should start immediately in your twenties to enjoy decades of compound interest before you retire.

Just seek guidance from a financial professional and invest your money wisely. 

5. Utilize the Retirement Calculator

Many people struggle with the most basic math questions. Don’t worry you’re not alone.

But, lucky for you, you don’t need to do the legwork. There are many helpful retirement calculators to work this out for you. 

Retirement calculators take your salary, current savings, and annual spending estimates to give you an answer to how much you need to save each month.

Don’t worry – the calculation also takes into account inflation and market returns. You may want to adjust the default setting to reflect your specific circumstances though.

You may expect to live longer than most folks because your grandmother lived over 100. Or, perhaps you trust in your vegan diet

Or, you may have put your money in low risks and low return investments which may not gain in value much. This could also affect the calculations.

Keep Track of Your Retirement Plan

Unfortunately, you can’t simply create a retirement plan and forget about it. You need to constantly keep track of it to make sure you’re delivering on your promises.

If you said that you would save 13 percent of your salary for retirement, you need to make sure you’re not spending your savings on expensive vacations instead.

Additionally, life changes from time to time. You may have drastically changed your life plan recently. For example, getting divorced can quickly change your financial circumstances.

Whatever it is, ensure that you’re regularly checking your retirement plan to keep it up to date with your current lifestyle.

Learn More About Retirement Savings

Now you know the answer to “how much should I save” in retirement.

You no longer need to keep throwing money in your savings without a second thought. And also, you can now hold yourself to account on your expenses each month. 

If you want to learn more about saving for retirement, check out our blog for more

This educational third-party material is being provided by Luke Will Director of Investments, Navigation Wealth Management as a courtesy.

Material discussed is meant for general informational purposes only and is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon only when coordinated with individual professional advice.

Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is an indirect, wholly-owned subsidiary of Guardian. Navigation Wealth Management is not an affiliate or subsidiary of PAS or Guardian. Navigation Wealth Management is not registered in any state or with the U.S. Securities and Exchange Commission as a Registered Investment Advisor. 2019-87086 Exp. 10/21

Luke E. J. Will

Luke E. J. Will was born and raised on a farm in Watertown, WI. His values and ideals were shaped by his hardworking family and are embedded into the relationships he builds with his clients. Luke has built Navigation Wealth Management with Kurt Zipp to deliver the “Navigation Way” of financial planning and asset management to his clients from all walks of life. The “Navigation Way” is built upon Trust, honest conversations, and understanding his clients financial goals.Luke attended the Wisconsin School of Business at the University of Wisconsin-Madison, where he earned his Bachelor’s degree in Finance, Investments & Banking.His favorite hobbies are hunting and fishing with family and friends. He is loves spending time outdoors including snowboarding, skiing, kayaking, and camping while spending any extra hours with his family, watching all the sports teams in Wisconsin play. Traveling, music concerts, and reading are few other interests.