What is a good amount for retirement?

Question

With so much talk going around about saving for retirement no one has really said how much you should save...im 24 now and im enrolled in 401k at my job...when im ready to retire how much should i have saved up since its being said that we won't be able to count on social security.

Answer 1

MSN money central has a savings calculator that works great for finding out how much you will have if you put away such and such amount! Figure how much you want to live off each year during retirement... double it and add a zero... that is the simple calculation you can do for the amount of money you need to have invested in an IRA, mutual fund or other, and live off its interest.

Example : if you want $50,000 a year to live off, then double it = $100,000 now add a zero = $1,000,000... you will need this amount to get $50,000 in interest annually with out working.

Check out MSN money central and click on their "savings caclulator" it will tell you how much you need to put away each month or annually which ever you prefer... with the number of years you plan on working yet to achieve this amount. You are starting YOUNG..hit it hard and soon you will not have to work hard,,, but your money will work hard for you ! : )

Answer 2

24? You're talking about retirement? Well, good thinking. You are on the right track.

60% of your earning while 60-65 is enough for comfortable living. You can't live like a King/Queen but it will be quite comfortable.

Do you need to save?
Absolutely yes.

How much?
That depends. Read on...

If the income from your saving at that age gives you 60% of what you will be earning at that age then you are off to the races. This is why nobody has a crystal ball to predict what amount is right. It varies from individual to individual.

At 24 year of age, here is what you do: Put away about $100 every month for the next 10 or 15 years. Don't ever stop this amount, no matter what happens in your life. Buy DRIP (Dividend Reinvestment Plan) from day one. Do it today. More about it here: Google it under "Drip" and you will get plenty of info.

Then, after 15 years of contribution - just stop doing any more contribution if you want. Watch it grow. It is like magic. When you are 65, you will have enough money. This is such a simple formula.

You can thank me later when you reach that age. Hope this answers your question. Nobody can answer "how much" clearly. This is the best answer you will get anywhere you go.

Why 60%? That's just a guideline for a comfortable living. If you want more, then of course sky is the limit. That's upto you to say what that limit is.

Do not depend on Social Security or the like. It is just a bonus/beer money..!! (it's your right to get that benefit as long as you have made the contribution).

Answer 3

How young do you hope to be when you retire and how old do you expect to be when you die? Do you plan to continue working part time after you retire or plan to have other sources of revenue to augment your reitrement savings? How lavish a lifestyle do you hope to be able to afford? A lot of factors can effect what is a good amount is retirement, which is why you've probably never seen a clear answer for this.

Since you're only 24, the good(?) news is that you can expect to live even longer the current life expectancy which already understates the real life expectancy of adults due to the number of people who die in childhood and disproportionally throw off the curve. With future medical advances, assuming you'll be able to afford them, you could live well into your 90's or beyond. I don't really know the exact number for you but you can look it up in a table somewhere. The reason I put a (?) after good is because if you has planned at the traditional age for retirement of 65 then that would mean you'd need to save enough to last you 25 years or more.

If you continue working even part time beyond that point then presumably you'd be making at least little something to augment your other savings mitigating your need somewhat for funds. Don't count on much from the Social Security Fund by the time you qualify.

The other I mentioned is lifestyle. How much does it cost you to live comfortably now. Some people need more than others. Whatever it is, you need to add an inflation factor extended out to the time you retire since everything will cost somewhat more by that time.

So what do we have? Current annual expenses adjusted for inflation less any additional source of income at that time times the number of years it will need to last. Hopefully that will help you arrive at a rough estimate of what you'll need.

Your next question should be what you'll need to save in order to get there. Your estimate may sound like a lot but it is probably very doable if you plan carefully (or else you'll need to adjust your retirement timing or lifestyle goals).

Your 401K is a great place to start. You should be putting as much in there as you can afford but at least as much as you need to fully take advantage of any company match. That's free money. What you save now will have the longest time to appreciate and multiply. If you understand the concept of compounding you can see just how powerful that can be. OTOH, as you get older and closer to retirement you'll probably be earning more and be able to set more aside though you'll have less time to compound it. Also keep in mind after you retire whatever you haven't spent will still be earning returns that you'll be able to use later in your retirement.

Answer 4

It's a rather complicated calculation involving some heroic assumptions such as your life expectancy, your income needs in retirement, and rate of return you will earn on your investments.

Just to give you an idea... If you save $1,000 a year for 40 years and are able to realize 7% real after-tax return on investment, by the time you retire, you will have assets worth about $200,000 in today's dollars. Assuming you retire at 65, live until 90, and earn 4% real after-tax return on investment while in retirement, these assets will afford you a real annual income of about $12,800, and you will have no money left after you turn 90. If you wanted to maintain the principal intact, you could only have $8,000 in annual income...

Also, Social Security is not the one you should be worried about most; Medicare is...

Answer 5

Tough answer. You have to decide on how much you need and for how long. Let's say you make $50k a year and that pays the bills and lets you have some 'fun' money.

For retirement, you would need maybe $30k. You wouldn't have a house payment, probably ,you probably would keep your car longer... but you'd vacation more and eat out more. Let's say $30k is enough.

You'll need it for 20 years (just guessing)
You're 24 so we need to look in the future at least 30 years. With inflation running about 3%, that 30k is now $70k.

So, you'll need at LEAST $70 per year for 20 years. That's $1.4Million. Given that, I'd guess that saving a total of 3-4 millionwould be the 'target'

not the greatest news, huh?

Answer 6

Simple, as much as possible. You have no idea how long you are going to be around for after retirement. Talk to insurance people about a retirement plan, and start with it as soon as possible, as the older you get, the more expensive the premiums get

Answer 7

Don't focus on how much you'll need (you're a long way away).

Instead, focus on saving 10% to 15% of your income for retirement and invest that money wisely.

Answer 8

The more you can save the better as the cost of living goes up (it always will) you need more money to live without going back to work. Max out your contributions to the highest level you can afford. This provides you with capital to borrow from over the years. You make the payments to yourself (with interest)

Answer 9

Depends on the lifestyle you want to have.

I would put as much into your 401K as you can afford. Hopefully your company matches dollar for dollar up to at least 6%.

As for me, I'd like to have $5,000,000. I don't want to have to be on a budget.

Answer 10

Save as much as your paycheck will allow you. Check with a financial advisor who can help establish the exact 'number' that you're looking for. You can find financial advisors that will not charge you for their services - especially if you have a life insurance policy with them, or other investments - it's considered a courtesy.