Do you know how much money you should have in savings?
Whether retirement is just on the horizon or still years down the road Carl Carlson, CEO of Carlson Financial discussed how much you need to be saving today so you can reach your retirement goals.
Most Americans want to retire sooner or later, but it seems like the million-dollar question is, “how much does it take to retire?” There are some general rules of thumb out there (like save 10%-15% of annual salary), but if you’re just following those and hoping for the best, your retirement plan is something of a shot in the dark.
Fortunately, there are steps you can take and resources one can use to increase the certainty of retiring when you want to.
Carlson said the first step is just figuring out what retirement expenses will look like. Over 50% of people will not try to estimate what their monthly expenses are, according to NerdWallet.
If you’re one of those people, just figure out what percentage of income you are saving currently, and whatever is left would be the amount you need for expenses in retirement (because you’ll no longer be saving for retirement when you’re retired).
You may want to use a good retirement calculator, Carlson suggested. Go online and Google “retirement calculator,” and adjust all the inputs: age at retirement, current income, saving percentage, amount of income needed in retirement, etc.
The calculators can take Social Security and pensions into account if you know those amounts.
The combination of Social Security, pensions and retirement savings will give you an estimated income at retirement. If it’s not enough for what you think you need, increase your current savings rate to find how much you need to be saving now to meet your goal for retirement, Carlson said.
People who are already saving as much possible, can adjust other variables instead. Maybe they work a couple more years, trim expenses, or target a better return on their savings. Carlson said even a 1% difference in the annual rate of return will make a huge difference over time to the amount you have at retirement.
If there is any question at all about whether you will or won’t be able to retire, you should not be managing your money yourself.