How Much Should You Save For Retirement?

Most working adults aim to have a comfortable lifestyle after they retire. It’s human nature to work hard while you’re able and then relax after decades of saving and putting in week after week of eight-hour days. The question most people ask themselves during their working years is, “how much should I be putting away for retirement?”

The smartest way to find out is to speak with a financial planner or CPA and come up with a detailed long-term budget. But even before sitting down with a pro and hammering out all the numbers, try to do some preliminary calculations. Having these estimates in hand when you consult with an expert will give you, and them, a solid starting point and will make the meeting that much more productive.

Some Numerical Guidelines

One good way to come up with a ballpark estimate of how much you will need for your post-retirement life is to assume you will be spending about 80 percent of what you do now. But the amount you will need to save each month depends on how long before you retire, how you intend to live, whether you currently need to pay off a lot of debt, and whether you intend to fund college costs for one or more children. These guidelines will help you start securing a financial future for yourself and your family as soon as possible.

Pull Cash Out of an Insurance Policy

Selling a term insurance policy through a process called a life settlement is a fast way to put a down payment on a retirement nest egg. This is especially pertinent if you have a term policy you no longer need or want. Why not convert it to ready cash? To learn more about how life settlements work, you can review a helpful online guide on how to sell your life insurance policy quickly and easily.

What to do with the proceeds? That’s up to you. Legally, there are no restrictions. People use the cash payout for all sorts of purposes, including taking a vacation, paying medical bills, and more. In fact, some policy owners sell for cash and use the money to pay for end of life expenses, pay off high-interest debts, and pay off their houses.

The Four Percent Rule

If you assume that your retirement fund, in addition to Social Security and any pensions, will need to cover your living expenses for 25 years, aim to build a nest egg that allows you to withdraw about four percent of the total amount out each year. For the vast majority of retirees, that means having somewhere in the neighborhood of $500,000 set aside by the time they retire. If you’re a working person ages 35 or younger, that amount is easily achievable as long as you plan carefully and follow a monthly budget.

Make a Retirement Budget Now

One of the best exercises you can do is to make a mock-up retirement budget. You’ll need to make some assumptions about debt and lifestyle, but it’s pretty safe for most people to assume that their only major debt will be a mortgage, and that their living expenses will be lower than what they are during peak earning years. Take this prospective budget with you when you visit your financial planner.

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