How many people do you know that claim they have saved too much for retirement?
Many people also believe they will spend less once they retire. This often is not the case as you have more time available to enjoy those things you could not do whilst you were working. If you want to sustain your lifestyle into your retirement you need to save for this. Most people cannot retire comfortably because they do not plan for this event and usually delay the implementation of their plan. This delay can make the difference between having the freedom of choice to do what you want to do or to be dependent on close family to look after you in your golden years.
So, how much should you save for retirement?
“As much as you can” is sound advice. It is historically recommended that you save at least 15% of your gross income for retirement. That is a general guideline.
This is your retirement we’re talking about, so it pays to get a little more specific by doing your planning up front. It’s a good idea to establish a savings target – one that tells you how much you should set aside over time to meet your retirement goals, and adjust the figures for inflation.
If you would like to receive US$3,000 per month in 20 year’s time from a nest egg which earns 7%, you need to build up capital of at least US$500,000, in today’s terms. Factor in inflation at a minimal annualised rate of 3%, and you then need to build a nest egg of US $900,000 to achieve your income goal in 20 years’ time!
A key part of any retirement savings plan is working out how large your nest egg needs to be. And it’s hard to do that unless you also nail down how much income you need each year in retirement.
For more detailed information on how to secure your future and retire financially secure, contact your nearest ProFin regional office.