Of course, you know that you will need a decent amount of money saved for retirement, but there is a good chance you don’t know exactly how much money you’ll actually need. There are many different variables you will need to consider to determine an approximation of how much money you’ll need to save up for when you retire, such as the lifestyle you want to have after you retire and at what age you plan on retiring. Here are some of the variables you will want to consider to figure out just how much money you will really need to retire.
1. How much money you have saved currently
First, you will want to consider how much money you already have saved for your retirement. The earlier you begin to save money for retirement, the greater chance there is that you will meet your goal.
2. What age you want to retire
Next, you will want to consider what age you want to work until, as the earlier you plan on retiring, the more money you will need to have saved up for your retirement. Most commonly, people plan on retiring somewhere in their mid-sixties, although many people will retire earlier if they have enough money saved up to do so.
3. How fast your money will grow prior to your retirement
It is also important to consider the growth rate of your money before you retire. Depending on your annual returns on your investments, you may have a big difference in the amount of money you will have compared with what you started with.
4. How fast your money will grow while retired
In addition to considering how fast your money will grow before you retire, you will also want to keep in mind how fast it will grow during your retirement. After you retire, you will probably want to keep your money in lower risk investments to keep it safe, so your investments will likely grow at a slower rate than they did prior to retirement.
5. The rate of inflation
Inflation causes prices to rise over time, making money less valuable than it previously was, so you want to also consider the inflation rate in order to determine the actual amount you will need to save for retirement, as the rise of prices over the years can cause you to have to save more for your retirement to compensate.
6. Any other income you will receive
People may receive income from many different sources while they are retired, such as social security or pensions. You should factor in any expected income you will be receiving during retirement to figure out what percentage these benefits can replace of your income prior to retirement.
7. How much you will take out each year during retirement
Finally, you will want to think about just how much money you will be taking out during each year of your retirement. Many people expect to live on less than they did before retirement. However, some people need more to live off of during their retirement than they did before.
About the Author: This article is written by Nick Brahhanin