How much should I save for Retirement
When it comes to how much to save for retirement, there are several key questions and variables to consider.

The earlier you start to save, the more money you will have, and the less effort it will require due to compounding interest. For example , a 25 year old who invests $2,000 a year for eight years and never invests an additional dollar after the age of 33 , will earn more by the age of 65 than a 34 year old who invests $2000 a year for 32 years, even though the 35 year old invests four times as much.

Everybody comes into retirement under different circumstances. Ideally you are mortgage free and in good health, but you may hope to build a house, go on regular vacations, or possibly even take that course you’ve always aspired to. It is estimated that you will need 70 – 80% of what your expenses were before retirement, but when taking into account these extra-curricular activities that percentage could increase to 90-100%.

It's important to make realistic estimates about what kind of expenses you will have in retirement. Be honest about how you want to live and how much it will cost. These estimates are important when it comes time to figure out how much you need to save in order to comfortably afford your retirement.

Do you hope to live a similar life to the one you have now or are there a number of things you’ve been holding out to do in your retirement? You may decide to sacrifice your standard of living and retire early. When mapping out your retirement there are no right or wrong roads to take. Simply different choices to suit each individual’s needs.

You can begin to estimate your retirement costs by assessing your current expenses, and then figuring out how they will change. For example, you can cut your commuting costs and mortgage repayments, but will need to allow for rising health care costs.

You should ask yourself how old you will be when you actually start drawing out of your retirement benefits, which isn’t necessarily the same as the time you will retire. You may decide to continue with a business venture of some kind or part time work that will keep you afloat past your first available withdrawal date.

Where possible, you should always put away the maximum amount that you can into your retirement plan, that way you won’t have to rely on big returns in order to retire. 15% is a good percentage to aim for.

Estimating your Social Security and any defined pension benefits is crucial in determining what you need to save, as these may subtract substantially from your monthly fund payments. However it is not advisable to rely on these benefits as your primary source of retirement income. Many elderly people using their Social Security as their sole means of support are living in poverty. It is also questionable as to whether this benefit will survive the increase in baby boomers retiring in a few years and no longer contributing to Social Security funds.
Your retirement income does not just depend on the amount you save, it also depends on the performance of the funds you invest in. It is a reasonable expectation that you will receive a higher return on aggressive investments, than if you were to keep all your investments in a banks savings account.

Retirement planning isn't something you do one time and then assume you're set for the next 20 or 30 years. Too many things can change. Your investments may do better or worse than you project. Your savings habits may improve, or a job layoff might force you to dip into savings. You may want to retire earlier than you originally intended - or you may decide you want to ditch your current career and start a new one in retirement.

All of these factors and more can affect how much you'll need to retire comfortably or, indeed, whether you're ready to retire at all. So go over your retirement plans periodically to monitor your progress, to see if there are problem areas you need to address and to be sure the assumptions you're making still apply.


 
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