How much should I be saving each year for retirement?

Question

I just turned 34, don't own a home but plan to buy in a few years, my annual income is about $49k, and my employer contributes up to $1000/year. I haven't contributed anything to my 401k so far but do have my employers pension plan. I've been with my employer for over 5 years so I'm fully vested, but I plan on making a career change in the next couple of years. Also, I'm financially strapped because I've been paying off credit card debt but in about 3 more months I will have most of it paid off and much more money left in my pocket each month. I want to make the most of my employers contribution ($0.50/dollar up to $1000/year) without emptying my wallet. Also, what should be my goal amount for retirement?

Answer 1

First, starting right now, invest in the retirement plan enough to entitle you to all the matching funds that your employer provides. A couple more years will allow you to vest some or all of that match. It's free money! Take it now, don't wait!

Then after paying off the debt, try to invest 10% of your gross income every month in a tax-deferred 401k. If you can swing it, start saving at least 5% every month for emergency fund, downpayment, etc.

I know asking 15% a month is a lot to save, but if you can learn to live on that, you'll be in great shape. If you can't swing it now, then set it for as much as you can, then when you get raises, devote that much more to saving.

Good luck

Answer 2

Good news:
1. You're being smart by paying down your credit card debt.
2. You definitely should make it a priority to contribute the $2000 a year to your 401(k) so you get your employer's $1000 match.
3. In addition to contributing to the 401(k) you should save somewhere like a bank account or money market fund for the down payment on the house.
Bad news:
1. Just a few thousand dollars a year isn't going to be enough. I'm not going to boggle you with math, but if you're making $49k per year, you should be saving at least $10k per year. It just depends what age you plan to retire and what kind of retirement lifestyle you want. Being retired can be very expensive because you have lots of medical bills and plenty of time to spend money.

Answer 3

Contribute as much as you possibly can now, you will thank yourself later. I personally think the ideal amount is at least a few hundred thousand dollars to retire comfortably on. You can't really save too much.

Answer 4

In 31 years (when you are 85), $40,000 at 3% annual inflation will be $100,000 then. So that $40,000 car now will cost $100,000 31 years from now. Inflation will only increase so if you think you will live to 95 $40,000 now will be $242,734 when you die.

Answer 5

34 yrs old ... 6% is good. As you age you should increase the amount.

Fidelity has a great online tool to help you figure it out.

Answer 6

You need to start putting away 3,000.00 a year for retirement. Every year as retirement approaches you should add another $300.00 dollars.

Answer 7

there are website that will give you your 'magic number" you can enter your savings, income, bills, ect. and it will tell you how much u need to save each month or year to retire comfortably.

Answer 8

10% a month....into your 401K...make sure you manage it and not the company.