Retirement planning is an important part of financial planning, and it's essential to have a good understanding of how much money you need to retire comfortably. A common guideline is that you should aim to replace 70% of your annual pre-retirement income. This can be done with a combination of savings, investments, Social Security, and any other source of income (part-time work, pension, rental income, etc.). Fidelity has developed a series of salary multipliers to provide participants with a measure of how their current retirement savings might compare to potential retirement income needs.
If you plan to pay off your mortgage before you retire or reduce your housing situation, you may be able to live comfortably on less than 80%. The National Retirement Security Institute (NIRS) reports that more than 75% of Americans have retirement savings that don't meet conservative savings goals, and 21% don't save at all. To help you understand how much you should have saved for retirement at different stages of life, let's take a closer look at the main retirement savings guidelines. You start with a lower percentage when you're younger, so by the time you reach retirement age, compound interest will have done its job and will help you achieve a comfortable retirement.
The Social Security Administration website has several calculators to help you estimate your benefits. The age at which you plan to retire can have a big impact on how much you need to save and on your milestones along the way. An individual retirement account is one of the most popular ways to save for retirement, given its great tax advantages. Elizabeth plans to retire at 67 and her goal is to maintain her lifestyle during retirement, so her savings factor is 10 times.
Max plans to delay retirement until age 70, so he'll need to have saved 8 times his final income to maintain his pre-retirement lifestyle. Whether your plans include a career change or a new business venture, cash savings outside of your retirement accounts can fund your dreams and push your retirement money to the ground. You may want to adjust your goal based on the type of retirement lifestyle you plan to have and whether your expenses will be significantly different. We've made lists of Roth IRA and IRA brokers so you can find the best places to create these retirement accounts.