Retirement is an important part of life that takes time and careful planning if you want to do it right. While you may think you have all the time in the world to save, most people retire around 65, which only leaves about 40 working years on average to prepare. This, then brings up the question: are you saving enough to retire? Remember that retirement is very personal and no two retirements (or retirement accounts) are going to look the same. With that in mind, we have come up with a few key thinking points to help you decide how much you need for retirement and if you are currently saving enough to meet your goals.
Arguably the most important step when deciding whether or not you are saving enough for retirement is to decide what retirement looks like for you. Consider the following:
When you consider all of these factors, you can calculate how much money you need to retire. Really sit down and evaluate these goals. If you feel you need a bit more help, speak with a professional to help you get solid numbers. Once you know how much you will need, you can move on to the next step.
There are many tools to finance retirement. Retirement -ceasing to work- can happen and almost any stage in life if you have the funds to continue living without working. With that in mind, you must consider how you want to fund retirement and where you want to store the money. Are you planning to retire using employer sponsored plans like a 401K or do you plan to use personal investment accounts like IRAs? Do you want to personally fund your retirement with private investments or personal savings? Once you decide how you want to save for retirement, compare it to your current savings trends. How much do you already have and how much do you need? How will your investments grow after inflation? Decide if you are on the right track and if you need to diversify your money to help speed up the process.
Deciding when you want to retire can steer your retirement plans completely. Consider whether you want to retire at the U.S standard age of 65 or if you would like to be younger than that. Maybe you would want to be a little older. Be as precise as possible when deciding to give yourself a clear timeline to follow. If your are 25 and want to retire by 40, you know that you have 15 years to accumulate the amount of money you decided you need to retire. If you want to retire at 60, you will have 35 years. Your timeline, in conjunction with the having your dollar amount and knowing how your investment tools will grow over time, can let you know if your current plan puts you on track, early, or behind for your desired retirement age.
It can seem like a lot to take in, but considering these three factors is the backbone for developing your retirement road map. Some conventional wisdom is to take your current salary and multiply it by 20-30 years to reach the amount you likely need to retire, but this is not a one size fits all plan. Create your in depth retirement map and check it against all forms of retirement savings that you are actively funding. This is the only way to let you know if you are saving enough. If you aren't, figure out what steps you must take to catch yourself up. Maybe you need to consolidate and then pay off debt, maybe you need to increase your income, maybe you just need a little wake up call to focus your efforts. Either way, take the time now to plan the best retirement for you.
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