Have you thought about how much money you need to retire comfortably? Most people have not. And most people won’t be ready for retirement either.
Experts suggest you’ll be able to live on 85% of your pre-retirement income, although you need to factor in inflation year after year. Different situations may move that percentage up or down, but that’s about what you should be aiming for. The average person is in retirement for about 20 years – so that’s a lot of money you’ll need saved up.
So how do you know if you’re on track?
Use a Retirement Calculator
CNN Money released a calculator that estimates how much money you’ll have when you retire. It’s pretty sophisticated, too. It takes into account:
- How inflation will impact your funds
- Social security benefits you’ll receive
- Salary growth at 1.5% per year
Here’s what it looks like:
This is their default, but I was able to enter my information and see that I’m not putting enough into my 401(k) if I want to make it to the recommended goal (which was actually somewhat surprising to me since I started shortly after college).
Tips for Growing Your Retirement Savings
If you’re behind or haven’t even started yet, here are some things you can do:
- Start now! The earlier you start, the less you have to play catch-up. Contributing to a 401(k) or IRA through your payroll can make it so you don’t even see the money.
- Meet your employer match. Many employers will match your contribution up to a certain percentage. This is essentially free money for you, so make sure you’re at least going as high as you can to get all that free money.
- Don’t touch your retirement savings. Withdrawing early doesn’t just hurt your future – you get penalized. Expect hefty tax fines for early withdrawal.
- Add an IRA account. As you get closer to retirement, you can also open an IRA account to start saving even more.
- Wait to collect social security benefits. Even though you can start collecting in your early 60s, hold out until 70 if you can. You’ll increase your monthly benefits.
Go the calculator now to find out how you’re doing!