As, you close to retirement ageIt is important to assess your financial situation and ensure that you will have enough savings to live comfortably in your golden years.
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But how much money should you have saved by the time you turn 60? The truth is that there is no one-size-fits-all number. The answer depends on a number of factors, including your income, expenses and retirement goals.
Find out how much is right for you
When thinking about retirement, most people are looking for a dollar amount that will lead to an ideal retirement. However, Doug Dahmer, founder and CEO of retirement navigator, said “the accuracy of ‘how much is enough?’ varies from person to person and [cannot] Should be answered appropriately unless someone takes the time to define what their ‘OK’ looks like.
A commonly used yardstick for retirement savings is the 4% rule, which states that you can withdraw 4% (adjusted for inflation) of your retirement savings each year without running out of money. For example, in your first year, if you had $1 million in savings, you could safely withdraw $40,000 without jeopardizing your retirement years. The 4% rule is not a perfect strategy, but studies have shown that it would have stood up to the Great Depression, World War II, and the recessionary period in the 70s.
However the question remains – how much will you need to cover your retirement?
Dahmer continued, “For those who are retiring near age 60,…consciously take the time to chart the financial course of what you want to accomplish in life, when you want to do it.” What you want, and how big you plan to do it, is absolutely essential. ,
So, there really isn’t a cookie-cutter answer to this question, but experts have some general tips based on age ranges that can help anyone in their retirement journey.
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in your 20s
Paul Deer, Vice President at empowerment, said, “For many people, their 20s is a time in their lives when they are starting their professional lives and possibly a new career. Their earning potential may be somewhat limited, which may make it difficult to build net worth during this decade.
The key is establishing good financial habits and disciplines that will help you build net worth for the rest of your life, such as setting aside a certain percentage of pay each month to save and invest.
Kendall Mead, Certified Financial Planner SophieSaid, “An employer match is free money on your 401k, but roughly a quarter of employees are leaving free money on the table by not taking advantage of their match.
We see this often happens with younger employees who aren’t earning as much, so we urge our 20 year old members to establish good habits early and get that match.
in your 30s
Deer continued, “One of the keys to building net worth during this life stage is continuing to prioritize savings and investing.” “Higher earnings can make it easier to afford mortgage and car payments, child-rearing expenses, and certain luxuries like nice vacations and fancy dinners.”
Instead, Deer said, “it is important to maintain the savings and investing disciplines that were established over the past decade and, if possible, to increase the percentage of income saved.”
Meade continued, “When you get a promotion, raise or bonus, try to make the most of it. Treating yourself can be tempting, but saving money instead can do two things: Curb lifestyle inflation and grow your savings for retirement.
Lifestyle inflation occurs when your expenses increase at the same rate as your income. Instead, work to keep your expenses down. You may find that you need less money to maintain your lifestyle.
in your 40s
The older you get, the more complicated your finances can get.
“Increasing financial responsibilities can make building net worth especially challenging during the 40s,” Hiran said. Like Mead, Deer stressed the importance of avoiding lifestyle inflation, otherwise known as “lifestyle creep”.
“It’s fine to enjoy the fruits of your labor, but keeping expenses under control will go a long way toward building [your] net worth,” said Deer.
Mead advised that people focus on avoiding fees. “Fees affect every age, but as you get older, your balances will start to get bigger and those fees will really add up,” she said.
“Let’s face it, fees are confusing, and many average investors don’t really understand what fees they are paying. A fee of 1% or 2% may sound like a small number, but it $5,000 to $10,000 per year if you have saved $500,000.
in your 50s and 60s
These two decades should really focus on wealth accumulation.
“Given the shrinking window before retirement, the most important net worth-building step for many people in their 50s and 60s is to max out their retirement accounts,” advises Deer. It’s also important to start paying down outstanding debt.
“… you can start to consider risk-freezing your portfolio or becoming more conservative so that your portfolio is less volatile,” Mead recommends.
“As you approach retirement, you should have an ongoing financial plan. This can give you an opportunity to see if you are on track or if any changes are needed before making an irreversible decision such as leaving the workforce permanently. leave as is
make a plan and stick to it
Whether you’re almost ready to retire or are in your 20s, the most important step you can take to make sure you can retire is to have a plan. There are lots of free and paid tools out there – or you can enlist the help of a professional like a Certified Financial Planner.
No matter how you go about it, take action now and secure your best financial future ever.
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This article originally appeared on GOBankingRates.com, Expert: How much should you have in your savings account by 60 – and how to get there
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