How Much Retirement Income Do You Need?
How much retirement income do you really need for your future plans?
Learn how you can start saving to retire sooner with tips from Royal Oak Financial Group.
Let’s assume you’re in your 20s. You’re still in the early stages of your career, making somewhere between $35k and $50k a year. Maybe you have student loans, maybe you don’t, but either way you probably don’t have too much money to just spend. Between rising rent rates, your 2002 Honda Civic constantly breaking down, and your friends always nagging you to go to happy hour, you and your bank account probably have some animosity. At this point in your life, the last thing you’re worried about is retiring. But, while that vitality and ability to go on a ten mile run at 7am after a late night out might feel everlasting…it’s not. Planning for your retirement isn’t something you should put off, regardless of your age. Therefore, us at Royal Oak Finance put together some of the ways to budget now and retire later.
While this can definitely vary depending on where you live, your health, your family, etc., the average amount of money that you’d need in your retirement fund by the time you retire is something close to $1 million. Yikes! Assuming you’re 25 right now and want to retire by the age of 65, you’re probably going to need to start saving a lot more than you currently are. But don’t panic and, more importantly, don’t ignore this elephant in the room. Retirement shouldn’t be stressful, but to adequately start prepping for the golden years, you’re going to have to do some cutting. If you’re totally lost on how much money you need to save or put away to be in a good spot, contact Royal Oak Financial and one of our experts will point you in the right direction.
If your paycheck is anything like that of most millennials, it’s probably not something your grandma is going to put on her refrigerator. While we can only hope that our paychecks will correlate positively with our years of experience, it still might momentarily be seemingly too low to extract anything else from, know that something is better than nothing. Depending on what you could afford, choose a percentage, whether it be 20% or 5%, to go into into that savings account. For example, if your current paycheck is about $2,000 twice a month (not including taxes) and you choose to put 7% into retirement, then by the end of the year, you’d already have well over $3,000 in your retirement fund. And, as you begin to earn more, you can up this amount.
So you’ve chosen a percentage. If you trust yourself to take a look at your paycheck and transfer all of that money that could be used on delicious restaurant outings and new shoes, go for it. However, the majority of us might have some issues with giving up that money on our own. Plan for a cut of your paycheck to automatically be deposited into your savings account. There are two ways to do this.
The preferable way to do this is through your employer. Many employers offer a 401(k) plan which allows you to designate a certain portion of your paycheck toward retirement accounts. The amount of money that’s invested every month and remains tax free until it’s withdrawn. Additionally, some employers offer a plan in which they match your investments up to a certain amount. For example, an employer might put in 3% of its employees pay assuming that the employee is also putting in a portion of their own pay.
An additional way to automatically set aside money into a savings account is through your bank or financial institution. Just give them a call and they’ll help you set up a retirement account where a cut of your pay is automatically deposited.
Automated transferring takes a lot of the hassle out of both saving and budgeting. When you receive your paycheck, you receive it as is, thus making budget planning much easier. You also become more accustomed to lower paychecks and might feel less bad about the extra savings money lost towards, well, your future. And, trust us, working full time at age 70 isn’t something you want to have to do.
Saving for retirement doesn’t have to be that daunting, regardless of your age and income. Start planning now, when you’re still young, and the willingness to save will feel more natural. As you begin to progress in your career and earn a higher salary, you’ll already be comfortable with adding a portion of your paychecks into your account. Who knows, maybe an early retirement is even in the books if you start now. If you have questions about retirement accounts, 401(k) planning, or investment accounts, contact Royal Oak Financial today and we’ll get you the retirement help you need!