Financial planners often recommend that you replace about 80% of your pre-retirement income to maintain the same lifestyle after you retire. Many 20-year-old Americans start their careers with entry-level paychecks, and it may seem too early to think about retirement, especially if you're paying off student loans. Buying a home and starting a family are common events in the lives of 30-year-old Americans, which can be costly and distract you from saving for retirement. Knowing your target retirement date can help you calculate how much you should set aside each month for retirement.
As a result, it's essential to have a retirement plan that includes a good mix of sources of savings and income. From your 20s to your 60s, planning for a comfortable retirement starts with looking at your income and expenses and finding ways to save more money. While the recommended savings amount for a retirement plan is up to four times your annual salary, this is not realistic for many Americans in their 40s. To cover recommended retirement savings by age, you may consider opening or contributing to an IRA (individual retirement account). However, an effective way to start saving for retirement at age 20 is to contribute to a retirement account, such as a 401 (k) plan provided by the company. This retirement security is important because it can help maintain the cost of living and prevent the purchasing power of retirement savings from diminishing over time.
In addition to those basic guidelines, experts recommend using a retirement calculator to get a more accurate idea of your retirement number. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. For example, if you were born in 1977 and want to retire at age 65, your retirement goal would be 2042. Saving for retirement may seem like a daunting task, but it's possible to achieve a comfortable retirement income. Many retirement savings plans also lower your taxable income, so you'll keep more than you earn today.
It's tempting to simply plan your short-term spending, but don't forget to prioritize long-term goals, such as retirement. We can determine when your retirement accounts and Social Security payments add up to cover your average monthly retirement income. This type of retirement plan has tax advantages and allows you to set aside funds in a separate location from your regular savings or emergency funds.