Have you ever asked yourself how much money do you need for retirement? Most of us work for our day-to-day needs. However, despite working hard, planning for the long-term future is usually put off. You sometimes think that you can always plan later when the thought passes your mind. But when is later?
Retirement might still be tomorrows away. However, planning for your retirement should be considered as early as possible. Financial problems that persist would affect how you would spend your retirement. It wouldn’t be the cozy relaxation at home or the fun vacation travels if you still have persisting debt or haven’t saved anything.
Managing Your Finances Now
Planning for your retirement is crucial. It’s what you would live off for the rest of your life after leaving work. There are most likely three general sources of where your income would come from employment income, pensions, and your investments.
Being financially unprepared for retirement can cause you stress and might take a heavy toll on your mental health.
Will you be able to save enough? But how much money do you need for retirement? Can you do something to reach that goal? Will you be able to sort out any financial problems before reaching that age? There must be numerous questions plaguing your mind right now. But don’t worry, this article will help you manage your finances for better and more secure retirement days.
Paying off all your debts
Before you can save significant money for your retirement, you must handle your debts first. This is a smart thing to do, but if you’re always stuck in an endless cycle of adding new debt, you wouldn’t be able to save enough money since its always going to paying a debt.
Four out of ten retirees put paying off their debts as a financial priority. Also, 3 out of 10 of this cite that their obligations come from credit card purchases, while 17% are paying off a mortgage, and 11% are consumer debts, like student loans and medical bills.
Debt should retire before you do, and there’s an order of paying off debts. With this, you’d be able to stash enough income in your savings account. Prioritize paying off your credit card debt since it has a high-interest rate and a revolving balance. Mortgage loans, auto loans, or any loans with a fixed payment every month should be next.
So, how much money do you need for retirement?
Now that you know how to handle your debt, you should start saving. But how could you begin saving if you don’t know how much money do you need for retirement? You must acknowledge today how much money you can make and how much you can put away for your retirement account. Having a monthly budget is a significant step in understanding how much money you earn and spend. A budget can also help you estimate how much money you're likely to need in retirement.
Schwab Retirement Plan Services researched to know what Americans think about retirement money. According to the results, 401,000 participants believe that to have a comfortable retirement, at least, a person needs an average of $1.7 million.
Many financial planners endorse that saving 10% to 15% of your income would be enough, given that you are starting your savings in your 20s. However, they would advise you to save as much as you can, not just staying within this niche of numbers. After all, this is only a general guideline.
How much money do you need for retirement relies heavily on how much you plan to spend in the future? Your income is your biggest wealth-building tool, and how much you earn equates with how much you can save. As long as you’re diligent in continuously saving for your account, then you’d reach your goal in no time.
Save, save, and save money.
Once you have a set goal with how much money do you need for retirement. It is time to act upon reaching that goal. This isn’t an option. This is crucial, and you must start setting aside money in your retirement account. Of course, you must use an appropriate requirement plan before you start putting money into an account.
This could be challenging for some people. Sure, you have a goal set now, but different factors could obstruct you from reaching this. Because of day to day expenses or sudden financial emergencies, most people think that putting away money would be difficult. Having a separate emergency fund save can insulate you from life's unexpected events.
Just remember that it’s always hard in the beginning. Changing your money behavior takes time. There are moments when you won’t be able to add money to your savings. Don’t be discouraged, though. There’s always a way to get through this.
You can always start small. If you can’t commit to the percentage mentioned above, you can put away the money left after you meet your monthly needs. Starting with a $250 for your retirement isn’t something that you should be ashamed about. If you keep it up, you’re setting yourself up for success.
Saving for your retirement might be something you think you can keep putting off. There’s nothing wrong with prioritizing your day to day expenses. However, the sooner you can save for the future, the better. Freeing yourself of debt is an essential first step to being successful with your money. Make sure you give time, effort, and money to both.
Brian is a dad, husband, and an IT professional by trade. A Personal Finance Blogger since 2013 who, with his family, has successfully paid off over $100K worth of consumer debt. Now that Brian is debt-free, his mission is to help his three children prepare for their financial lives and educate others to achieved financial success. He blogs at Debt Discipline.